Learning something new.

I recollect that one of the things they told me – back when I was still undecided about whether I should join the stinking hell-hole (quite literally – try going near the coffee-machine) was that it would be a ‘wonderful learning experience’. Over the last few days, I’ve come to realise that this was no idle boast.

I have learned, to be more specific, a quite brilliant way to pay yourself out of company funds without reporting it to the relevant regulators or paying tax on it or anything else. Here’s how:

Let’s say you’re the MD & CEO of a (purely hypothetical, of course) company called i3 Infotech Pvt. Ltd. For the purpose of this illustration, we shall assume your name is V. Srinivasan. You are rather chummy with some of the people who work for you in this company – some jolly chaps who we shall call Feroze, Shivanand, Sripat and Meherzaad.

.

Well, you set up a subsidiary company of i3 in Mauritius – a shell company that does nothing and is fully capitalised by the parent company in India. Then you set up another shell company in Cyprus that does, if possible, even less.

That done, you invest in the shares of the second company at 1 Euro per share and buy – oh, let’s say about twenty shares in the names of these chums of yours – the ones who work for your company and all that.

Then, about a year later, you sell these shares (of the company that does nothing and as such cannot really appreciate in value) to the subsidiary in Mauritius. Those twenty Euros now become worth about 526,000 US Dollars. Yessirs, that’s an appreciation of 1,314,900 percentage points in one year.

After that, you pay the money to those chums of yours as purchase consideration for those shares. I suppose later you have those chums send the money to you – I haven’t learned that much yet.

What I have learned, though, is that the money invested by shareholders in i3 Infotech has been paid to its top management tax-free, without any reporting and without any declarations being made.

Somehow it’s something I wish I’d never known.