Paul L. Caron

Tuesday, August 12, 2014

Olson: Rat Out Your Employer On Taxes. Win Cash Rewards!

Reason:  Rat Out Your Employer On Taxes. Win Cash Rewards!, by Walter Olson (Cato Institute):

VanguardA former employee has filed a lawsuit charging that Vanguard Group, the gigantic ($2 trillion under management) and very successful mutual fund company, provides services to the funds it manages at "artificially low," "at-cost" prices, which may be beneficial to investors in those funds but (the suit argues) results in lowering the federal and state income taxes it pays. 

New York's False Claims Act, under which the employee is suing, entitles him to a generous share of any tax proceeds as well as attorneys’ fees if successful.

The Philadelphia Inquirer and Wall Street Journal have more; the complaint is here courtesy of TaxProf. The company denies wrongdoing, and the general question of transfer pricing on which the claim hinges is very well aired in the tax and accounting literature, which makes it seem unlikely that auditors would have neglected the issue.

If it sounds like you’re hearing about more cases where discontented employees are turning in their bosses on tax charges for a share of the bounty, you're right. ... It's worth noting that the action against Vanguard, like most of the new wave of litigation, does not rest on the IRS's own tipster program. Instead, clever lawyers are turning to pro-plaintiff state versions of the federal False Claims Act, charter for bounty-hunting litigators.

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