IRS pays whistleblower $104 million … The Internal Revenue Service has awarded an ex-banker $104 million for providing information about overseas tax cheats — the largest amount ever awarded by the agency, lawyers for the whistleblower announced Tuesday. Former Swiss banker Bradley Birkenfeld is credited with exposing widespread tax evasion at Swiss bank UBS AG. Birkenfeld himself served roughly two and-a-half years in prison for a fraud conspiracy conviction related to the case, which resulted in a $780 million fine against the bank and an unprecedented agreement requiring UBS to turn over thousands of names of suspected American tax dodgers to the IRS. − AP
Dominant Social Theme: Go get those tax cheats.
Free-Market Analysis: The famous author Charles Adams once observed that governments who overtax their citizens are nearly always "hoisted on their own petard."
Adams wrote an expansive book about government tax history entitled For Good and Evil: The Impact of Taxes on the Course of Civilization. His main thesis was that tax policy shaped the course of civilization for good or bad.
Today it begins to look as if US tax policy is tipping over into the bad. Of course, some would say that happened long ago, as far back as the Whiskey Rebellion that George Washington stamped out.
The kind of whistle blowing that the IRS is encouraging is verging on what ancient Roman tax authorities would do when they'd authorize civilian deputies to collect taxes for a percentage.
Adams explains that this was toward the end of the empire when citizens were increasingly refusing to cooperate with what was seen as a bloated, corrupt Leviathan. It can be said that the end of the Roman Empire came because its citizens simply didn't feel the civilization was worth fighting for. And thus, the barbarians arrived at the gates – and then overthrew them.
Grant that taxes are necessary – even in the modern central banking era. Still, US policies are not improving from a tax standpoint. Is a Roman dénouement on the way? Who can say? Trends are questionable at best.
It is not, perhaps, the fault of the IRS, which is a collection mechanism. Yet certainly the IRS brain trust must have information it could give Congress about collections and what must be an increasing resistance to Congressional/IRS policy.
As the US government begins to go after citizens abroad for taxes, it begins to further alienate the global banking community that does not want the responsibility of garnishing the wages of American citizens.
And now Congress wants the IRS to pull the passports of Americans that are deemed not to have paid taxes. This contravenes the whole idea of due process but Congress seems less concerned about that fundamental right these days.
Here's some more from the article excerpted above:
"The IRS today sent 104 million messages to whistleblowers around the world — that there is now a safe and secure way to report tax fraud and that the IRS is now paying awards," Birkenfeld's lawyers, Stephen M. Kohn and Dean A. Zerbe, said in a statement. "The IRS also sent 104 million messages to banks around the world — stop enabling tax cheats or you will get caught."
The IRS, which doesn't usually confirm individual award payments, said Birkenfeld signed a disclosure waiver, allowing the agency to confirm his award.
"The IRS believes that the whistleblower statute provides a valuable tool to combat tax non-compliance, and this award reflects our commitment to the law," IRS spokeswoman Michele Eldridge said in an email.
Birkenfeld has become something of a cause celebre among whistleblowers because of the magnitude of his case and the fact that he was jailed after cooperating with authorities.
In a summary of the award provided by Birkenfeld's lawyers, the IRS said, "The comprehensive information provided by the whistleblower was exceptional in both its breadth and depth."
"While the IRS was aware of tax compliance issues related to secret bank accounts in Switzerland and elsewhere, the information provided by the whistleblower formed the basis for unprecedented actions against UBS AG, with collateral impact on other enforcement activities and a continuing impact on future compliance by UBS AG," the IRS said in the summary.
Federal prosecutors, however, had said Birkenfeld withheld information about his own dealings with a former UBS client who pleaded guilty in 2007 to tax charges.
Notice the almost triumphant tone of the quotes. More and more the IRS and the legal profession surrounding it seem to be operating from the default position of an adversarial process.
But being adversarial from a taxing standpoint is probably not an effective position. If a population perceives that society is just and that people receive fair value for their tax dollars, then taxation will take place without undue difficulty.
But if the populace begins to believe that society is becoming unfair and unjust then there will be more and more resistance to tax collection. We would argue this latter trend has strengthened in the US and throughout the West – especially since the advent of what we call the Internet Reformation.
It has occurred to people, for instance, that central banking printing of money-from-nothing is an effective way of providing funds to the federal government … so why are taxes necessary as well? And then there is the issue (in the US certainly) of Federal Reserve disbursement of literally trillions in funds to various crony banks and financial firms during the 2008 financial crisis.
As people internalize these issues thanks to the Internet, the resistance to government regulations and taxing authority begins to rise. Government is perceived as amoral and its operations predatory.
Whether this is fair or not can be argued. But what cannot be gainsaid is the increasing resistance to business as usual. Whether it is the rising tide of the Tea Party in the US or rising violence in Europe, the Internet era and economic paralysis are combining to create unusual circumstances.
Government officials should probably be redoubling their efforts to address public concerns and to emphasize transparency and fairness. Unfortunately, too many are moving in the other direction.
IRS agents now carry guns; the rhetoric of triumphalism when it comes to pursuing and catching tax "cheats" is disconcerting.
Is such aggressiveness purposeful? In this case our analysis might be that the power elite that wants to run the world is purposefully encouraging discord and suspicion between citizens and their governments. The idea would be to create maximum chaos and resentment within the body politic that will result in outright rebellion.
Once discontent has peaked, world government shall be offered as the alternative.
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