India has offered amnesty to more than 100 wealthy citizens who evaded taxes by hiding funds in accounts at HSBC Holdings Plc (HSBA)’s Swiss unit, according to a government official with knowledge of the matter.
The income tax (I-T) department has agreed not to start criminal proceedings or levy a penalty if the Indians repatriate the money from Geneva and pay the taxes, the official said, asking not to be identified because the information is confidential. The official declined to name anyone on the list.
India joins countries including the UK and the US in cracking down on rich people who haven’t disclosed offshore funds amid probes into money laundering and tax evasion.
The amnesty offer in India is being made to some people who were on a list of 700 citizens with HSBC accounts in Geneva that was given to the South Asian nation’s government by French authorities last year, the official said, without providing additional details. The government is still investigating other people on that list, the person said.
“It’s a pragmatic approach,” said R K Gupta, managing director at Taurus Asset Management Ltd, which manages $1 billion in assets. Bringing back money that hasn’t been accounted for is now a “global phenomenon,” he said.
The Central Board of Direct Taxes, which includes the income tax department, was asked to probe whether the 700 account holders had evaded taxes, India’s Sunday Express reported on August 7, citing finance ministry officials that it didn’t identify. The names of HSBC clients won’t be disclosed until the I-T department begins prosecuting them, the Economic Times reported on November 22, citing Finance Secretary R S Gujral.
Anuja Sarangi, a spokeswoman at the Central Board of Direct Taxes in New Delhi, didn’t respond to e-mails or calls seeking comment on Monday. Laxman Das, chairman of the CBDT, also didn’t respond to an e-mail. Rajesh Joshi, an HSBC spokesman in Mumbai, declined to comment.
“As a general principle, we do not comment on whether individuals are our clients or provide the number of clients of a particular nationality,” Medard Schoenmaeckers, a Zurich- based spokesman for HSBC’s private bank, said by phone.
France obtained data on accounts held at HSBC in Geneva after a bank employee, Herve Falciani, stole information connected to at least 24,000 current and former clients, the London-based lender said in March 2010. Authorities in countries including Italy and the UK have since begun investigating whether those clients included people who were evading taxes or involved in money laundering.
At the time of the data theft more than five years ago by Falciani, HSBC’s Swiss private bank had no more than 1,500 clients in any one country, a Geneva-based official who declined to be named in line with company policy, said in May.
HSBC’s Swiss private bank in September 2008 asked clients and independent money managers to surrender their rights to banking secrecy protection. In countries including India, where rules demand investor disclosure, HSBC sought permission to hand over the names of clients that want to keep their overseas investments, the bank said in a letter e-mailed to Bloomberg News in July 2009.
India is also proposing a clampdown on tax avoidance from April 2013 onwards if foreign institutional investors route money to the country through tax shelters. The value of illicit Indian assets held abroad was about $462 billion, or 72 per cent of the nation’s underground economy, according to a November 2010 report from Global Financial Integrity, a Washington-based research firm that focuses on the cross-border flow of illegal money.
India has lost $213 billion in tax collection due to such flows from 1948 to 2008, it said.
The research firm’s estimates for illicit outflows from India, while being useful, “are incomplete and further studies are required,” India’s then-Finance Minister Pranab Mukherjee said in a report titled “White Paper on Black Money” in May.