Most of those who normally would be expected to carry the greater burden of tax, however, manage to escape the clutches of the tax authorities by numerous subterfuges. Some of these are quite ingenious - like borrowing heavily from banks and then declaring insolvency to defraud the banks, the taxmen, the auditors, and sometimes their own junior partners or small shareholders.
Politically influential celebrities have been known to borrow heavily, and then have the debts written off by the respective banks. Of course, no taxes are paid on such ill-gotten gains!
Then there are the tax havens in offshore centres, established for the overtly specific purpose of providing moneyed people a shelter to keep their wealth outside the reach of their national tax authorities. Since this is a global phenomenon, just one classic example will suffice to illustrate the point.
Mark Rich is a Jewish businessman of US origin, and a fugitive from justice, wanted in his native country for tax fraud, money laundering, misappropriation of funds, trading with enemy (Iran), and a host of other crimes ad misdemeanours - too numerous to mention.
He sought refuge in a European country. There he sits comfortably, trading with countries around the world in billions every day, with complete impunity. He is provided complete protection by that country's authorities as a valuable national asset, who contributes vast sums to the GDP, despite paying only a very nominal amount as fees to that country as taxes.
His turnover and profits run into trillions in dollars or other currencies. Being now a naturalised citizen, the extradition treaty with USA cannot be invoked under his host country's law. His case has been narrated in detail by Paul Erdmann, a retired and reputed international banker and writer about the inner working of the international financial world, in a chapter in one of his best sellers.
This example is not lost on our own illustrious sons of the soil, who make their own arrangements to suit their purpose, and the government is helpless. People will recall the case of one of our former prime ministers and an ex-chief minister, owning a string of large industrial units.
He had borrowed heavily and then got billions of bank loans written off, while his own tax returns showed a tax liability of just some three hundred odd rupees for that year, while salaried people in very lowly circumstances probably pay hundreds of times more than that every year.
[To be continued]