By Lionel Laurent and Emile Picy
PARIS (Reuters) - France needs to beef up its methods for fighting tax evasion, according to a parliamentary report on a tax probe into HSBC
The report, published on Wednesday, looked at why it took French authorities more than four years to begin an investigation into HSBC after receiving leaked data on clients at HSBC's Swiss arm.
It said there had been good progress on tracking down funds but called on the French authorities to tackle "weaknesses" in the fight against tax evasion.
"The case of the HSBC list has shed light on the weaknesses in our legal arsenal in the fight against systematic tax fraud," lawmaker Christian Eckert wrote in the report on behalf of the National Assembly's finance committee.
France, like countries across the world, is cracking down on tax after the financial crisis, which has put government budgets under strain and increased the need to maximize tax receipts.
The country began a formal investigation into HSBC in April over whether it sold products designed to avoid French tax.
An HSBC spokesman was not immediately available for comment.
The parliamentary report described a variety of legal, technical, diplomatic and procedural issues that began almost as soon as former HSBC employee Herve Falciani leaked five DVDs of data to the French tax authorities in December 2008.
There were internal obstacles over the different remits of the tax authorities and the prosecutor's office, which in 2010 transferred responsibility for the case from the Mediterranean city of Nice to Paris.
The sheer size of the client list, which ran to 65 gigabytes over several formats, meant it took a year to extract the names behind each client account, according to the report, in a project dubbed "Operation Chocolate."
After the client names were extracted it was found that there were $5 billion in undeclared assets.
Diplomatic setbacks also put investigators at a disadvantage. The report said Switzerland could not be counted on to give assistance because the Swiss had made Falciani a "casus belli."
Eckert, a leading figure on the parliamentary finance committee, said in the report there was no evidence of any tampering with evidence or pressure to scrub any names off the list.
The report made no comment on the probe into HSBC. It said that since 2010, the tax authorities had begun to chase down the largest accounts and had sufficient time to track down and tax all funds where applicable without a need for urgency.
Falciani was questioned by French lawmakers, including Eckert, on July 2 to help tighten proposed rules against tax evasion.
Falciani, a Franco-Italian, was in France after taking refuge in Spain from Swiss authorities seeking his extradition.
(Reporting by Lionel Laurent and Emile Picy. Editing by Jane Merriman)