I can honestly see some assholes abusing this to create trouble for people they just didn't like.
Even if you limit the amount you can report another user to one per own account, they could make alts or get their friends on board.
Aside from that worst-case, most reports that are seriously dealt with are scams of one variety or another, and for those you need discussion and evidence... your system seems like it would either have to be completely automated or else the staff would be absolutely flooded with useless reports and no way to solve any of those which are genuine.
I guess I just can't see it working out.