September 12, 2012
Cape Town, South Africa
Yesterday, news broke that the US government has awarded a whopping $104 million to convicted felon and former inmate Bradley Birkenfeld.
It was a big headline and you likely saw the news… but it’s worth a deeper look. Because if there is one story that neatly summarizes what is wrong with the US these days, it is the case of Mr. Birkenfeld.
Birkenfeld, as you may recall, is a former private banker at UBS. For several years, his job at the bank was to help clients evade taxes, including one now famous instance in which he snuck diamonds hidden in a tube of toothpaste into the United States on behalf of one of his clients.
It turns out that Uncle Sam had his eye on Birkenfeld. Big time. And when the government started leaning on him, Birkenfeld sung like a canary… confessing not only his own transgressions, but also those of his clients.
Birkenfeld was subsequently convicted and sentenced to 40 months. And based on the volume of information he provided, a number of his former clients were also charged, imprisoned, and forced to pay steep penalties to the government.
Look, just to be crystal clear, tax evasion is not OK. I’ve been writing this for years– not paying taxes is stupid. Whether you have the moral or legal justification is irrelevant. When the guy holding the gun gets to make the decision, you lose. It’s simple.
That being said, Birkenfeld violated just about every professional ethic imaginable when he turned on his clients. It’s not like he had a change of heart and suddenly wanted to ‘do the right thing’; this is a guy who used to advise his clients about how to hide their money, and then ratted them out to save his own ass.
Now the government is rewarding this behavior. It’s extraordinary when you think about it– Birkenfeld actively assisted people evading taxes. He helped make the money disappear to begin with. Now he gets a piece of the pie?
This is like driving the getaway car in a bank robbery, then getting a cut of the recovered funds after you dime out your accomplices.
It’s despicable to see such actions rewarded while people who work hard for an honest living struggle to get by. Another triumph of justice, it seems.
Naturally, US politicians are supportive, saying that Mr. Birkenfeld’s reward sends a warning message to tax cheats and dodgy bankers around the world.
Yeah, maybe. It also send a message to every bitter ex-wife, disgruntled employee, and suspicious neighbor out there: you too can become unimaginably wealthy by ratting out your friends, family, clients, and co-workers.
It’s really unfortunate, though not terribly surprising, that Uncle Sam would seek inspiration from Nazi Germany when it comes to taxes. Frankly, I think Singapore serves as a much more powerful example.
Taxes in Singapore are low. Compliance is simple. The laws are easy to understand. The tax code itself is short. They make it so easy, it’s not worth anyone’s while to evade taxes. Amazingly enough, the country is swimming in cash. Shocker.
When he launched the iTunes store several years ago, Steve Jobs fundamentally believed that most people would be willing to pay for music (instead of illegally downloading songs) if they were presented with an easy, inexpensive, legal alternative.
He was right. The iTunes store went on to be a big success for Apple, the record companies, and consumers. There’s no reason why taxes can’t be the same way. It’s certainly a better option than having a nation of weasels.