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Then there is the strange case of Mauritius. More than 40 percent of foreign direct investment in India comes through this tiny island in the Indian Ocean. In part, that statistic reflects an India-Mauritius tax treaty that legally eases the flow of investment funds into India. But, experts say, it also allows Indians to launder vast amounts of untaxed wealth by sending their illegal cash to Mauritius, then "round-tripping" it back to India in the form of legal investments. If it would take concerted effort to shut down complex, international money-laundering operations, catching at least some of India's high-end tax dodgers should be ridiculously simple. This is, after all, a country where flaunted wealth often seems as common as traffic jams. How about targeting the buyers of the 25,000 luxury cars sold last year in India? Or the buyers and sellers of big-budget apartments? What about the people racking up thousands of dollars a month in credit card bills? Maybe tax investigators could go to those high-end malls, looking to see who is buying all the expensive shoes. While the government says it recently has begun targeting some big spenders, mailing notices to tens of thousands of people they say may have underpaid their taxes, few believe officials have truly become aggressive. "It's not really that difficult to chase down the tax dodgers," said Mecklai, the consulting firm CEO. "It's just a matter of putting the machinery in place."
So why isn't the government doing that? The answers range from sheer incompetence to corrupt tax bureaucrats to a political class accustomed to making vast wealth on the side, and unlikely to do anything that might jeopardize its ill-gotten gains. Certainly the Indian public sees official corruption as a major part of the equation. "Of course I don't pay all my taxes," said a New Delhi businessman who spoke on condition he not be named because he was admitting to breaking the law. "Why should I pay my taxes while the politicians are getting richer and richer every day?" Such talk is, experts say, the most commonly heard rationale for tax evasion, one entrenched by decades of political corruption and waves of official scandals. But it doesn't explain everything. Iyer, the Ernst & Young tax expert, notes that the culture of tax-avoidance runs deep in India. She points particularly to the way buyers and sellers of real estate openly discuss how much of the price will be paid in "white" declared money, and how much will be paid under the table in "black." "No one thinks of it as something to be ashamed about," she said. "In a country of holier-than-thou's, no one thinks that it's a blatant lie" to cheat on your taxes. Embarrassment, she said, may be what India needs most of all. "The moment this society establishes a stigma to it, I think you'd see a change."
[Associated
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