Welcome to yet another edition, chief!

In today’s edition — The Delhi High Court has made it clear that reporting tax evaders doesn’t guarantee a reward. Informers are free to tip off the authorities, but whether they get paid or not is entirely the government’s call. But globally, that’s not the case. In countries like the US, UK, and South Korea, whistleblowers get a cut of the recovered tax.

Finder’s Fee? Not Guaranteed

Vishwas Ved

In a recent ruling, the Delhi High Court said something that should be noted by anyone who ever thought of reporting tax evasion expecting a reward.

The court made it clear that an informer does not have a “right” to get rewarded. 

The government may give a reward, or it may not. It depends completely on the officers handling the case.

The case was about a woman who had informed the tax department about a business called M/s Shakti Enterprises. She had given information saying that the business was evading GST. 

Based on what she shared, the department sent a tax demand notice to the business, and even put penalties at one stage. So she felt that since her information led to action, she should receive the reward scheme amount.

But later, some of the penalties and tax amounts were reduced in the appeal stage. The final demand raised was much smaller than before. 

The woman was unhappy because she felt that the authorities did not evaluate the case properly, and she still wanted her reward.

But the court said an informer is only someone who gives information, not a party to the case. They cannot question how the tax department calculated the tax or argue whether the penalty should have been more. Moreover, they cannot ask for a reward as if it is guaranteed.

The court also made it clear that getting a reward is a matter of discretion. It is not something anyone can demand because it is not a legal right. 

The court even said that a writ petition (a legal challenge) cannot be filed by an informer to claim a reward.

There is still another hearing scheduled in December, but it’s unlikely the court’s stand is going to change. 

So, is this betrayal unique to India or informers across the world face it? Let’s find out.

What Informers Get Elsewhere

In India, whether an informant gets a reward or not, depends on the officers. There is no fixed percentage amount, and there is absolutely no guarantee. 

In fact, the authorities here can simply say thank you and close the matter. 

But in some other countries, passing credible information to the authorities can get you a life-changing reward.

In the United States, for example, the tax authority has a very different approach. As per their law, if someone gives information that leads to tax collection, the person gets a percentage of the recovered amount. Somewhere between 15% and 30%. 

Many people in the US have earned large sums this way. Take the example of Bradley Birkenfeld who got $104 million.

Birkenfeld was a banker at UBS in Switzerland. He revealed to the US authorities how UBS was helping wealthy Americans hide their money offshore to avoid paying taxes. 

His information helped the US government recover $780 million in penalties from UBS and forced the bank to hand over names of secret account holders.

The IRS Whistleblower Office awarded him $104 million.

In the UK, on the other hand, things used to be pretty much similar to India. The HMRC (His Majesty's Revenue and Customs) would surely pay informers, but it wasn’t guaranteed. They decided case by case. 

For example, in 2017, HMRC had paid £100,000 to a person who provided information that helped crack a large VAT fraud operation in the UK. The informant’s identity was kept secret, which is common in the UK.

But in March this  year, the UK government announced that it would introduce a new whistleblower reward scheme inspired by the US and Canadian models. 

Under the new scheme, people who provide information leading to the recovery of significant unpaid tax will be eligible for a percentage-based reward — expected to be somewhere around 5% to 30% of the tax collected.

In South Korea, too, rewards can be quite high. Somewhere between 5% and 20% of the recovered amount. Some people there have received enough to buy property. Their system is designed to encourage whistleblowing.

So, informers exist everywhere. But the level of support and clarity differs a lot.

Final Words

So the unspoken rule is: if someone in India reports GST evasion, they should do it because they believe it is the correct thing to do. They should not assume they will necessarily receive a reward. There is simply no guarantee.

If a person wishes to make a living out of informing, then sadly India is not the place for that expectation.

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ICYMI | Just Don’t Do It

Missed last week's update? Sometimes the smartest move a CFO can make is to skip a meeting on purpose or let a problem roll away to another cabin. That’s because stellar results don’t come when you focus on every issue. Nestle CFO Anna Manz says finance chiefs can improve their performance when they carefully choose what deserves their attention and what doesn’t.

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