Have you ever wondered why actors like Amitabh Bachchan, Shah Rukh Khan and Akshay Kumar are among India’s biggest taxpayers and not, say, Ambanis, Tatas or Birlas, even though they have huge business empires and are richer than the actors?

Their wealth has grown even during the pandemic, but they pay less taxes than Bollywood actors. Why is that?

The answer may lie in ProPublica’s study of income tax data on American billionaires.

In June of this year, ProPublica, a Pulitzer Prize-winning investigative newsroom, claimed that U.S. billionaires pay very little income tax. ProPublica said it had seen the tax returns of some of the world’s richest people, including Jeff Bezos, Elon Musk and Warren Buffett.

According to the website, the 25 richest Americans pay less taxes — an average of 15.8 percent of their adjusted gross income — than most ordinary U.S. workers.

In 2007, the then multi-billionaire and now richest man in the world did not pay a cent in US federal income tax. He managed this feat again in 2011.

Tesla founder Elon Musk, the second richest person in the world, also paid no federal income tax in 2018.

Michael Bloomberg has done the same in recent years. Billionaire investor Carl Icahn has done it twice. George Soros has paid no federal income tax for three years in a row.

The alleged leak comes at a time when there is a growing debate around the world about the level of taxes the rich pay and growing income inequality.

The combined wealth of the world’s 10 richest men has increased by $540 billion (Rp 40 trillion) during the pandemic, Oxfam said. This amount would be enough to prevent the world from falling into poverty due to the virus and to pay for vaccines for everyone, Oxfam says.

The stocks of the companies they own have multiplied, so have their real estate holdings, and their pictures are constantly appearing on the cover of magazines as the richest people in America or the world. Yet they pay a minimal income tax rate.

The majority of wealth of rich people/billionaires consists of investments in stocks, real estate, bonds, gold, cryptocurrencies, etc. There is no wealth tax in either the US or India. Unrealized gains are not considered as an individual’s income.

Only when these billionaires sell their investments and make profits are these treated as income and – depending on how long the asset is held – taxed as long-term or short-term capital gains.

Many US billionaires who have built or inherited wealth borrow money against their assets (loans against stocks/loans against real estate) at low interest rates to finance their expensive lifestyles. In addition, they can claim the interest expense on such loans as a deduction from their income.

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Last year, Tesla reported that Musk had pledged approximately 92 million shares worth approximately $57.7 billion (as of May 29, 2021) as collateral for personal loans.

ProPublica, based on data from Forbes magazine, found that the wealth of the 25 richest Americans increased by a total of $401 billion from 2014 to 2018 – but during that period they paid $13.6 billion in income taxes. That’s a staggering sum, but it corresponds to an actual tax rate of just 3.4 percent.

From 2014 to 2018, their after-tax net worth in the United States grew by an average of about $65,000, largely due to increases in the value of their homes.

However, since most of her income was salary, her tax liability for that five-year period was almost as high, at nearly $62,000.

According to ProPublica, “many super-rich people are able to use perfectly legal tax strategies to reduce their tax burden to near or even zero,” even though their wealth has grown rapidly in recent years.

In India, the big bosses of large companies, as CEOs, receive salaries and perks from their companies, which are taxed accordingly. However, they can avoid most of their taxes because wealth tax was abolished in the 2015 budget.

The government argued that the costs of collecting wealth tax were higher than the resulting benefits.

The tax returns of Indian billionaires are not publicly available in India, nor has anyone conducted an investigative story like ProPublica.

One difference in India and the US is that interest on personal loans is not deductible from income. A maximum of Rs 30,000 can be claimed as a deduction if the amount is spent on home renovation or improvement.