The US is seeking an order from a San Francisco federal court authorising the Internal Revenue Service (IRS) to request information from HSBC Bank about US residents who may be using accounts in HSBC India to evade federal income taxes, the Justice Department said Thursday.
"The ability to hide accounts in foreign countries is rapidly dwindling. We will continue working hand-in-hand with the IRS to enforce the tax laws against those who are using offshore accounts -- wherever they are located -- to evade taxes," said John DiCicco, the Principal Deputy Assistant Attorney General for the Justice Department's Tax Division.
On Thursday, the government filed a petition with the court to allow the IRS to serve what is known as a "John Doe" summons on the bank.
The IRS uses a John Doe summons to obtain information about possible tax fraud by people whose identities are unknown.
If approved, the John Doe summons would direct HSBC USA to produce records identifying US taxpayers with accounts at HSBC India, many of whom are believed by the government to have hidden their accounts from the IRS.
According to documents filed with the government's petition, on January 26, 2011, a grand jury in Newark, New Jersey, indicted Vaibhav Dahake of Somerset, New Jersey, charging him with conspiracy to defraud the US by using undeclared accounts in the British Virgin Islands and at HSBC India to evade his income taxes.
According to those documents, employees of HSBC Holdings Plc and its affiliates operating in the United States assured Dahake that accounts maintained in India would not be reported to the IRS.
In its court filing, the US government alleged that, according to HSBC’s website, in 2002, HSBC India opened a "representative office" at an HSBC USA office in New York City to enable Non-Resident Indians (NRIs) living in the United States to open accounts in India.
In 2007, HSBC India allegedly opened a second representative office at an HSBC USA office in Fremont, California, purportedly "to make banking transactions more convenient for the NRI community based in California."
Although HSBC India closed those offices in June, 2010, the government alleges that NRI clients may still access their accounts at HSBC India from the United States.
According to the petition documents, NRI clients have told IRS investigators that NRI representatives in the US assured the clients that they could invest in accounts at HSBC India without paying US income tax on interest earned on the accounts and that HSBC would not report the income earned on the HSBC India accounts to the IRS.
