Tom and Jerry, the celebrated cartoon characters, have real life counterparts. If Tom cat, the eternal loser, is the taxman, Jerry mouse, the perennial winner, is the taxpayer.

Like Tom and Jerry, the taxpayer and the taxman are constantly engaged in a war that has a billion battles within.

And this is not just an India-centric occurrence; rather, it is global. The world over, no one likes to pay taxes to the government. After all, no government has ever been able to justify the taxes it collects vis-a-vis the services it provides. No wonder, like Jerry, the taxpayers go to extraordinary lengths to outsmart Tom, the taxman.

Consider this: Kenneth Dart, an American billionaire, gave up his United States citizenship and opted to become the citizen of a small central American nation called Belize. This was ostensibly to avoid the high incidence of income tax in the US. Since he had to also stay in the US and control his business, he 'engineered' to become Belize's ambassador to the US and operated from the US itself -- all with full diplomatic immunity!

Obviously, under American laws, when a person renounces his citizenship, he is allowed to be in the US only for a limited amount of time. Otherwise the Inland Revenue Service of the US can tax you as a resident. However, being a foreign diplomat allows a person to stay in the US for as long as he likes. What's more, foreign diplomats can not be taxed. That's one way how Jerry wins.

That's not all. Dart hates paying taxes so much, that it is rumored that after he dies, he is supposed to have made arrangements to keep his brain alive artificially, so that his legal heirs don't have to pay any estate taxes!

Welcome to the enchanting, enticing and exciting world of tax dodgers! No wonder, Kenneth Dart is hailed as the master.

Master and the Grandmaster...

But if Kenneth Dart is the master, there are quite a few grandmasters of tax evasion in India. The desi version of the story above comes with a minor variation. Under the Indian tax laws, global income is taxed in India in the hands of a resident if a taxpayer resides in India for more than 182 days.

This is the classical definition of a 'Resident' for the purposes of taxation in India.

Put differently, if a person has to escape global income from being taxed in India, taxpayers have to spend more than 182 days abroad and thus claim Non-Resident Indian status. That exempts their foreign income from being taxed in India. But how to stay abroad for more than 182 days when a good portion of business is in India and requires personal intervention?

Fortunately for these taxpayers, Nepal offers the escape route. After all one can visit Nepal without passport. As far as stamping the passport is concerned - the conclusive evidence of having travelled abroad - Nepal allows Indians to come in and exit without any entries in passport.

And our grandmasters use this to their fullest advantage by "getting" hotel bills, albeit at a small cost, from Nepal as evidence to compensate for the lack of appropriate entries in the passports.

But that is not all. Our grandmasters usually have an unusual interest on farmlands. Why even barren lands would do. Readers may have often noticed celebrities; film stars and politicians suddenly claim to be farmers. It is not without a purpose.

In the process, they could even turn into Popeye, the cartoon character and innocuously talk about the virtues of something as humble as spinaches which they would "innocently" reveal grows in rich abundance in their "farm."  Again one must hasten to add that readers may be well aware that farm income is not taxed in India. That explains their tryst with spinaches or any other farm produce.

The idea obviously is to create appropriate evidence on the generation of farm income so that they are not left without one at the time of assessment that may take place a few years later.

The grand design is to ensure that much of their regular 'income' from their usual sources, which attracts the normal rates of taxes, would be booked under "farm income" which does not attract any tax.

Surely, there is something terribly wrong with out tax intelligence. This is all the more so because one often notices a definite pattern in the manner in which grandmasters plans his (or her) business and tax affairs. All through the year, he would build up his wealth from a number of "sources."

One of their favourite is the method of receiving gifts on their marriage, marriage anniversary, birthdays of his family members and other such important occasions. Meticulously these would be recorded in their books and substituted for their income.

This game was too obvious to the department and a few years back the Finance Minister had sought to tax gifts except when made by close relatives. This partially plugged the loophole in the tax laws. But our grandmasters cannot be deterred by such trivia.

Our grandmasters maintain a number of tax files and sought to register their personal income through such files. Popularly called as benami transactions, the maze of debits and credits between the files ensured that the actual beneficiary as well as their income was concealed from the tax authorities. By this method, domestic helps, cleaners and drivers are reported to return income running into few lacs! This division of income lowers the tax incidence and the tax bill.

The final one is plain and simple. This is usually achieved by settling major transactions through cash so that such transactions are never recorded in their books. Grandmasters have in the process elevated the art of tax planning over the years into a perfect science of tax evasion. Despite in the know, the IT department remains a mute spectator, as grandmasters happen to be the rich and mighty of the land.

And instead of proceeding against them for such massive infraction of law practiced by them, successive governments have repeatedly offered our grandmasters tax amnesty schemes and have sought to bail them out. No wonder the scourge of parallel economy continues to bedevil our nation.

But now we have legalised tax evasion

All that was stated till now here is of the black and white vintage. These are old ideas in tax planning ops avoidance that are relevant even to this day, but to some extent outdated. Remember, we are a global economy and even on tax evasion we need to become global and move beyond our borders.

Naturally our governments have entered into double tax avoidance agreements with many other countries, some of which have lax tax laws. To amplify further, when an income arises in such places such tax treaties provide that income will be taxed in such places only, where the tax rates are minimal or even zero.

Of course tax professionals (obviously available in abundance but at a price) world over split their hair to the maximum possible to prove that a particular income "arises" in that particular tax haven and not otherwise.

Tax professionals repeatedly talk of treaty shopping, leveraged buyouts, thin capitalisation, dividend stripping etc. Do not get fooled by such jargons - all of them simply mean one and the same - to move the tax incidence to a low tax jurisdiction from a high tax jurisdiction.

And for Indians the Indo-Mauritius DTAA is god sent. Experts tell me that this agreement provides that the capital gains on shares arising from an investment originating from Mauritius into India shall be taxed in Mauritius. And the capital gains tax rate in Mauritius is nil. Naturally, this provides an incentive to the rich and the mighty of India to route their investments into India through Mauritius. The detour is highly profitable, as it ensures zero taxation!

In a highly discussed decision of the Azadi Bachao Andolan the Hon'ble Supreme court held that the tax residency certificate issued by the Mauritius Ministry is enough proof of residency and it cannot be further questioned. The court further added that even if the residency is artificially created in Mauritius as long as the treaty does not contain an anti-avoidance provision the courts cannot interfere. With the stamp of approval of the Supreme Court we can dare say that we have legislated tax evasion to perfection.

While the finance ministry has a track record of overturning virtually every single decision of the Hon'ble Supreme Court on tax matters by carrying out appropriate amendments to our tax laws, this one has not been.

The reasons are not very obvious to this author. Nevertheless, it may not be of place to mention that the US has plugged such loophole effectively in its DTAA with other countries.

It is however rumoured that the money of the rich and the mighty of this land have first taken out through the hawala route and then are re-routed through Mauritius into India. Consequently, this DTAA with Mauritius has not been amended to plug such gaping loopholes. Well, I must insist that it is merely a rumour and nothing more.

But if it were a rumour, what else would explain why Jerry is constantly on the winning side? Any guesses?

The author is a Chennai based chartered Accountant. He can be contacted at mrv1000@rediffmail.com