HOW THE RICH NEVER PAY TAXES ? : Business Case Study | Aditya Saini

Summary

In this video script, the speaker discusses how the ultra-wealthy, such as Jeff Bezos, Elon Musk, and others, manage to avoid paying taxes legally, despite their immense wealth. The video explains the difference between tax saving and tax evasion, highlighting methods such as stock compensation, the minority discount, and charitable donations that help billionaires reduce their taxable income. It also touches on the loopholes in tax systems that allow them to minimize their tax liabilities. The speaker encourages viewers to use smart financial practices, like paying credit card bills on time to earn cashback, as a way to improve their financial discipline.

Takeaways

• 😀 Only 6.25% of India's 132 crore population pays income tax, while in America, it's 45%.
• 😀 Despite being billionaires, many top CEOs like Jeff Bezos, Elon Musk, and Larry Page pay little to no tax to the government.
• 😀 Billionaires often run their businesses with a salary of $1, instead receiving stock compensation.
• 😀 The government creates tax exemptions for the rich through loopholes and tax-saving strategies.
• 😀 Direct taxes include income tax, capital gains tax, and corporate tax, while indirect taxes are paid by common people (e.g., GST in India).
• 😀 People with similar incomes may pay different taxes due to the nature of their earnings, e.g., a high-income job vs. business profits.
• 😀 Tax saving is different from tax evasion; saving reduces tax liability through legal means, while evasion involves illegal activities.
• 😀 Billionaires often avoid paying taxes legally by reducing their taxable income using methods like minority discounts, stock compensation, and charitable donations.
• 😀 The concept of minority discount allows the devaluation of assets by creating LLCs with multiple stakeholders.
• 😀 Stock compensation allows CEOs to take $1 salary while increasing their wealth through rising stock values and reducing company taxes.
• 😀 Charitable donations enable billionaires to reduce taxable income and avoid capital gains tax, as seen with philanthropists like Philip Knight of Nike.

Q & A

What percentage of the population in India pays income tax?

Only 6.25% of India's population, which is approximately 132 crore people, pay income tax.

How does the tax payment in the United States compare to India?

In the United States, 45% of the population pays income tax, which is significantly higher than in India, where only 6.25% contribute.

Why don't billionaires like Jeff Bezos, Elon Musk, or Larry Page pay taxes?

These billionaires legally avoid paying taxes through strategic financial practices, including the use of tax-saving loopholes in the tax system.

How can billionaires live on a $1 salary and still accumulate wealth?

Billionaires often take a $1 salary but are compensated through stock options, which appreciate over time and are used to raise loans, avoiding taxes on their income.

What is the difference between tax saving and tax evasion?

Tax saving is the legal reduction of tax liability through deductions and exemptions, while tax evasion is the illegal act of hiding income or engaging in activities to avoid paying taxes.

How do LLCs help the wealthy avoid taxes on their assets?

LLCs allow wealthy individuals to hold properties or stocks through a company with multiple stakeholders, which devalues the asset on paper, lowering the taxable value.

What role does stock compensation play in a CEO's earnings and tax liability?

CEOs often receive stock compensation instead of a cash salary. This allows them to avoid paying income tax and, instead, take loans using those stocks, which are not considered taxable income.

How does donating to charity help billionaires avoid taxes?

Donating to charity, especially appreciated assets like stocks, allows billionaires to reduce their taxable income and avoid capital gains tax, as donations are tax-deductible.

Why does the government create tax exemptions for business owners?

Governments create tax exemptions for business owners to encourage economic growth, job creation, and investment. These businesses generate tax revenue indirectly from employees and consumers.

How can individuals use credit cards to improve their financial discipline?

Using credit cards wisely, paying bills on time, and tracking spending can help individuals improve their credit score, avoid interest charges, and earn cashback rewards.