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HSBC’s Swiss, Dubai units under lens for abetting tax evasion by Indians

The bank, in its annual report, said the income tax department in February 2015 issued summons and request for information to its Indian company.

By: ENS Economic Bureau | Mumbai | Published: February 23, 2016 2:22:26 am

HSBC Holdings on Monday said it has received notices from the Indian tax department for alleged abetting tax evasion of four Indians and their families. The tax department has asked the bank why it should not prosecute the Dubai and the Swiss arm of the bank for abetting tax evasion.

On February 22, 2015, the tax department conducted a survey at the Mumbai office of HSBC India and questioned its top officials after a report published on February 9 by The Indian Express revealed a list of 1,195 names with Indian addresses who were clients of HSBC’s Swiss private arm with deposits of Rs 25,420 crore in 2007.

The bank, in its annual report, said the income tax department in February 2015 issued summons and request for information to its Indian company.

Subsequently “in August 2015 and November 2015, HSBC entities received notices issued by two offices of the Indian tax authority, alleging that the Indian tax authority had sufficient evidence to initiate prosecution against HSBC Swiss Private Bank and its Dubai entity for abetting tax evasion of four different Indian individuals and/or families and requesting that the HSBC entities show why such prosecution should not be initiated,” said HSBC in its annual report.

HSBC said it is cooperating with the tax department in India. “With respect to each of these ongoing matters, HSBC is cooperating with the relevant authorities in a manner consistent with relevant laws,” said HSBC. Senior revenue department officials declined to comment on notices to the bank.

The income tax department can seek cooperation from foreign counterparts in cases of tax evasion, through Double Taxation Avoidance Agreements (DTAAs) and Tax Information Exchange Agreements (TIEAs).

HSBC has been under the scanner of various tax administrations, regulatory and law enforcement authorities around the world. Countries such as Belgium, France, Argentina are conducting investigations and reviews of HSBC Swiss Private Bank and other HSBC entities “in connection with allegations of tax evasion or tax fraud, money laundering and unlawful cross-border banking solicitation”.

On Monday, HSBC reported a decline in its profit before tax from its India business as part of its annual earnings. According to the bank’s annual report, it reported a pre-tax profit of $606 million from its India business in 2015, 13.4 per cent lower than the $700 million in pre-tax profit reported in 2014.

With regard to another probe in the US relating to Indian-origin clients, HSBC said it is cooperating in ongoing investigations by the Department of Justice and the US Internal Revenue Service.

This probe is “regarding whether certain HSBC companies and employees, including those associated with HSBC Swiss Private Bank and an HSBC company in India, acted appropriately in relation to certain customers who had US tax reporting obligations”.

HSBC Holdings also said that the US SEC is investigating the company for its hiring practices in Asia Pacific. The SEC is “investigating multiple financial institutions, including HSBC, in relation to hiring practices of candidates referred by or related to government officials or employees of state-owned enterprises in Asia Pacific”, it said.

“HSBC has received various requests for information and is cooperating with the SEC’s investigation,” said the company.

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