The US Department of Justice (DOJ) has
launched legal proceedings to force HSBC to hand over tax details
of wealthy US Non-Resident Indian (NRI) clients who held accounts
in its Indian bank.
The US Internal Revenue Service (IRS) wants to
file a John Doe summons to obtain information about possible tax
fraud by US clients of Indian origin with more than $100,000 in
HSBC India accounts.
Go deeper with GlobalData
Although the investigations are focused on
HSBC clients in the affluent segment, it signals the next phase in
US regulators’ efforts to crackdown on US residents using foreign
wealth managers to hide taxable assets.
The latest probe follows UBS’s high-profile
wrangle with the IRS over the names of 4,450 US client accounts
which was concluded late last year.
HSBC in ‘constructive dialogue’ with
regulators
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By GlobalDataAn HSBC spokesperson said it was engaged in a constructive
dialogue with US authorities and hoped any IRS Summons issues could
be resolved expeditiously.
“While we haven’t seen the summons, HSBC does not condone tax
evasion and fully supports the US efforts to promote appropriate
payment of taxes by US taxpayers,” the bank said in a
statement.
“While complying with the law in all the jurisdictions in which
it operates, including India, HSBC cooperates with requests from US
authorities,” the statement added.
Non-Resident Indians lured with tax evasion
pledge
The HSBC investigation will focus on transactions between 2002
and 2010 stemming from NRI accounts opened by a representative
office of HSBC India in New York and California.
Although HSBC India closed the offices in June
2010, the IRS alleges NRI clients may still access their accounts
at HSBC India from the US.
“NRI clients have told IRS investigators that
NRI representatives in the US assured the clients they could invest
in accounts at HSBC India without paying US income tax on interest
earned on the accounts, and HSBC would not report the income earned
on the HSBC India accounts to the IRS,” the DOJ said in a
statement.
In February, the IRS launched a second tax
amnesty designed to bring offshore money back into the US tax
system that closes on 31 August.
Nearly 18,000 US taxpayers have declared
untaxed assets in the 18-month period to February 2011, estimated
to be worth hundreds of millions of dollars.
