A Whistle-Blower’s Monetary Reward Should Be Taxable

by Joseph G. Lariosa

CHICAGO (JGL) – In my recent visit to the House of Representatives (HOR) in Quezon City in the Philippines, I met my long-time acquaintance, Buhay Partylist Rep. Lito Atienza, while I was being accompanied by my former Manila Bulletin colleague and current beat reporter Ben Rosario to the office of Rep. Maria Leonor “Leni” Gerona-Robredo.

Evelyn R. Tolledo, president of Chicago, Illinois area-based Bikol U.S.A. of the Midwest (BUSAM), asked me to make a beeline to the HOR after learning that I was on my way to Manila to cover the visit of President Obama several weeks ago.

Tolledo wanted me to extend her invitation to Rep. Leni Robredo as guest of honor and speaker at the 34th national convention of the Bikol National Associations of America (BNAA) at Hilton Rosemont/Chicago O’Hare Hotel at 5550 North River Road from July 25-27, 2014. BUSAM is hosting BNAA’s annual convention this year.

Representative Atienza asked me and Rosario to regroup after he attends the session as he was on his way to the session hall but I demurred and told him maybe Ben can see him but I can’t because I was pressed for time.

Had I accepted Atienza’s invitation he could have discussed with me his publicized proposal to ask for the whistle blowers in the P10-billion (US$227-M) Priority Development Assistance Fund (PDAF) pork-barrel scam to return whatever money they have now in possession.

The Buhay Partylist representative was fuming after Filipino businesswoman Ruby Tuason was allowed the return P40-M (nearly US$1-M) to the Philippine government by the Philippine prosecuting arm, Ombudsman, in exchange of immunity. The Ombudsman agreed to a plea agreement provided Tuason returned the loot.

Atienza said it is now about time that the whistle blowers, who are in possession of the PDAF largess, should likewise follow suit.

Had I had a chance to talk to Atienza, I would have told him that I agree that the whistle-blower should return all the government monies that they have now.

But if the returned monies will turn out to be material evidence in prosecuting senators, congressmen and government officials that led to the conviction of these government officials, all the whistle-blowers should be entitled to must be at least 25 percent of whatever amount of money recovered by the government from the thieves.

According to this link, http://tinyurl.com/q49zj39, in December, 1989, “PCGG (Presidential Commission on Good Government) entered into finder’s fee contract (for 10 percent) with Australian investigator Reiner Jacobi to search for suspected Marcos accounts in Switzerland,” and on “December 1993, the Ramos government enters into a 75%/25% sharing agreement with Marcos family thru PCGG Magtanggol Gunigundo.”

My question, which is taking PCGG forever to answer, is how much percent in “finder’s fee” does the PCGG now give to a whistle-blower, if a Marcos’ tipster’s tips lead to a recovery of Marcos’ stolen wealth?

If the PCCG, grants as much as 25 percent to one of the bounty hunters of the Marcos loot, why can’t the Philippine government reward whistle blowers in the PDAF scam from “10 to 25 percent” in reward money of the gross amount of the loot if the information provided is “new” (and if tax, penalties, interest, addition to tax and additional amounts in dispute exceed $2 million or P80-M)?

No reward is forthcoming to the whistle blower or tipster, if he “planned or initiated the action.”

And whatever money that would inure to whistle blowers should be taxed like any other income tax that bounty hunters, private bailiffs, lawyers, doctors, accountants, etc. earn professionally in the course of their livelihood or sleuthing.

In the U.S., the Internal Revenue Service Whistle-blower Office pays money to people, who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistle-blower, it can award the whistle-blower up to 30 percent of the additional tax, penalty and other amounts it collects.


To even the playing field, a U.S. Tax court judge ruled that “a whistle-blower’s $6.8 million in awards must be taxed as ordinary income.” The U.S. Tax Court rejected arguments that the money should be recognized as capital gains and subject to a lower rate.  The top tax rate for ordinary income in the U.S. is 35 percent while the capital gains is taxed 15%.

In the U.S., whistle-blowing rewards are just like gambling winnings in lotto, poker, slot machines in casinos, etc. that are taxable. Can’t the Philippine government likewise tax winnings in lotto, sweepstakes, jueteng/masiao and cockfight winnings and gambling winning among others?

I would suggest that Atienza expand these taxable monies to any whistle blower fees to tipsters in criminal and civil cases (reward information money) not only to government employees but also to private employees, who should be protected from retaliations if they tell on the criminal and civil violations of their supervisors and their bosses and the public at large.

And one other thing for the safety of the whistle-blowers and tipsters, he can include in his new bill to give them option to become anonymous.

As with the winners of lotto, who have option to be anonymous, the whistle-blowers and tipsters can just provide the police and/or government agencies the personal information of the whistle-blowers and tipsters that will be matched with a passcode or security information, like a PIN (Personal Information Number), when you access your ATM account to deposit or withdraw, the whistle-blowers or tipsters can just provide their Code or PIN when they turn in their tips and/or when they collect their rewards.

Nobody knows the personal information of the whistle-blower or tipster but the police or government agency, which received the tip or the information.

While there maybe a need for whistle-blowers to come into the open if authorities would like to validate the tips, if majority of the whistle-blowers and/or tipsters would no longer be called to court because their tip/s could speak for itself/themselves, this whistle-blowing and tipping industries would surely expand into cottage industries that would surely help the government stamp out graft and corruption in and out of the government.

I hope Representative Atienza, believed to be the first Manila mayor to ever concede his mayoral election defeat, can use his position to pass a bill that would tax and reward whistle-blowers while protecting them from criminal and civil retaliations.

Let’s keep our fingers crossed.


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