Tax Raids on Indian Diamond Firms Related to Swiss Accounts

(IDEX Online News) – Indian Income Tax authorities raided four diamond-manufacturing firms in Mumbai Tuesday. These and earlier raids of a number of large diamond manufacturers are understood to be linked to a list of Indians who held secret bank accounts with HSBC’s private banking branch in Geneva, Switzerland.

In 2010, an HSBC employee fled to France from Switzerland with a list account holders at the branch, starting a series of tax evasion investigations. French authorities subsequently handed the Indian government a list of 700 names of Indian nationals who had accounts with the bank.

Saying that it would “stop receiving information if it did not honor international treaties,” the government has so far not made the list public. This has had government opposition parties up in arms and along with the current highly public mass movement against corruption, the government has come under intense pressure to take action.

According to news reports, Income Tax sources said that the Indian accounts range from $9.5 million (Rs.500 million) to $57.5 million (Rs.3 billion). However, because the list was stolen from Switzerland and therefore will not be officially certified by the Swiss government, the tax authorities cannot use it in a court of law.

The department has, therefore, opted for a carrot-and-stick approach. They have informed many on the list that not much will happen if a voluntary disclosure is made. Some 17 individuals out of the total 700 have subsequently opted to file a 'revised return' — a procedure allowed under the Income Tax Act for taxpayers who think they made a mistake while filing the original return. Revised returns are normally filed within a year of the filing of the original.

If action is initiated against any of these persons, however, the Enforcement Directorate, which administers India’s Foreign Exchange Management Act (FEMA), gets involved. Charges relating to violations of FEMA and money laundering are then liable.

France has reportedly passed to Belgian, Israeli and Canadian authorities details about accounts held by citizens of these countries. The list of HSBC clients reportedly includes the details of 24,000 individuals.