HSBC admits to helping customers avoid tax
The banking world is once again in trouble as HSBC admits helping its clients evade millions in tax. It claims to have changed its ways, but is justice soft on the rich?
Europe’s largest bank is at the centre of an international scandal. A BBC investigation has revealed that HSBC helped thousands of clients to avoid tax by hiding their earnings in anonymous Swiss bank accounts and concealing it from the UK government.
The charges originate in 2007, when a computer expert working at the bank obtained documents containing the financial details of more than 100,000 clients and leaked them to the press. The French authorities declared in 2013 that 99.8% of their own citizens on the list were probably evading tax.
Swiss banks are subject to far less regulation than those in other countries, and unlike most countries Switzerland allows account holders to conceal their identity. There are many different types of tax and many legal and illegal ways to pay less, and these complexities enabled HSBC to help many clients evade tax.
Storing money abroad is often legal ‘tax avoidance’. However, deliberately hiding money to pay less tax is illegal ‘tax evasion’, as all money in foreign accounts must be declared to the government, and this is what HSBC have admitted to enabling.
The issue of tax has been divisive in recent years. Tax evasion is generally committed by the rich, as they can afford to hire top accountants and bankers to help conceal their money effectively. The comparison is often made between tax dodging and benefits fraud. Many see the two as similar: both are dubious ways of acquiring more money.
Tax evasion is said to cost the country £5.2 billion, while benefits fraud costs just £1.2 billion. Famous evaders such as Gary Barlow and Jimmy Carr were widely vilified, but escaped major punishment. Meanwhile those who claim undue benefits can be put in prison and have benefits taken away. People see proposals like the ‘Bedroom Tax’ as an example of the government trying to squeeze as much money as possible from the poor, while giving the rich an easy ride.
A taxing issue
Some see no moral difference between the rich obtaining money illegally and the poor doing likewise, in these ways. Keeping as much money as possible for yourself is a natural human impulse whether you’re rich or poor, they say. While no-one is excusing tax evasion or benefits scams, both are understandable. Being rich does not endow you with superior morals, and if people see a way to get money easily, they will.
Of course the rich should be more heavily punished, say others. People who claim extra benefits are often doing it because they have large families to support, and would struggle without the extra money; rich people do not need the money they keep from tax evasion, and it is nothing more than theft on the part of those who pay so little tax.
- Is it wrong to steal a loaf of bread to feed your starving family?
- If you were a high earner, how much tax do you think would be a fair rate to pay?
- Class debate: ‘This house believes the rich should be taxed more than the poor’.
- Compare a society where the government takes all income as tax and one where the government takes none. What would be the problems experienced by such societies, and would either be better than the other?
Some People Say...
“A penny saved is a penny earned.”Benjamin Franklin
What do you think?
Q & A
- Tax is just a percentage of someone’s income, isn’t it?
- It is much more than that. While income tax is one type of tax, there are many others, such as Inheritance Tax, Duty, Property Tax and VAT (Value Added Tax). The number of taxes and their detailed rules make the tax system so complex and help lead to the various ways of exploiting the system.
- Apart from tax avoidance, why do people use Swiss banks?
- Switzerland’s financial sector has generally been conservative and eschews risky strategies. The country’s history of political and military neutrality has made it a safe haven, particularly during the Second World War, where both sides of the conflict could store their assets safely.
- A British multinational bank founded by the Hongkong and Shanghai Banking Corporation (HSBC), where the corporation set up branches in 1865. The bank made a profit of $16 billion in 2013 and currently employs over 250,000 people in 80 countries.
- Many territories have made their name as so-called ‘tax havens’, where rich people keep their money due to extremely low tax rates. Monaco, the Channel Islands and the Cayman Islands are examples of this. Many major companies are also based in tax-havens for the same reason.
- Gary Barlow
- In June 2012, it was revealed that, along with his Take That band-mates and over 1,100 other people, Barlow had invested £26 million in music industry investment schemes that could be used as ways to avoid tax.
- ‘Bedroom Tax’
- The common name for the ‘Under-occupancy penalty’, the ‘Bedroom Tax’ was put forward in 2012 as a reform whereby people living in properties with unused bedrooms would face a reduction in Housing Benefit.