Britain’s Treasury chief Rishi Sunak has defended his wife’s decision to take advantage of rules that allow many foreigners to escape UK taxes on their overseas income, saying critics have launched a smear campaign against her to get at him.
In an interview with the Sun newspaper, Rishi Sunak said that he expects scrutiny as a politician but it is unfair to attack his wife, Akshata Murty, who is a private citizen with her own career and independent investments. Murty, a fashion designer and businesswoman, is also the daughter of the Indian billionaire who founded the information technology company Infosys.
Opposition politicians have demanded more details about Murty’s finances after she confirmed she had “non-domicile” tax status, which allows people who aren’t permanent residents to avoid British taxes on money earned overseas. The issue is sensitive for Sunak because he just increased the income taxes most UK residents pay in the middle of a cost-of-living crisis.
But what is a non-domiciled status?
Non-domiciled status is a tax status that can be used by someone who lives in the UK but has a “primary connection” – in other words, their permanent home – outside the country, according to British tax guidance.
If a person is non-domiciled, they can pay a fee to be allowed to pay tax on a remittance basis – that is, only on income brought into the United Kingdom.
A non-domiciled person must decide whether to pay tax on remittances or on their total income. Sunak married Murthy in 2009, and the couple moved to the United Kingdom in 2013, according to the I newspaper.
A “non-dom” can choose not to pay British tax on income or capital gains earned outside of the UK, unless they bring the money into the country. They are still required to pay tax in the United Kingdom on money earned in the United Kingdom.
It may benefit wealthy individuals who earn their income outside of the United Kingdom by allowing them to take advantage of lower tax rates in other countries.
This has made it a target for those who claim the British tax system favours the wealthy, and the term “non-dom” is frequently used as a derogatory term by the media.
The Sunak-Murthy Story
Akshata Murthy is the daughter of Narayana Murthy, the billionaire co-founder of IT services company Infosys. She owns around 0.93% of the company.
Her spokeswoman had earlier said that Murthy was treated as non-domiciled for UK tax purposes, meaning she would not pay taxes in Britain on dividends from the Indian business. “Akshata Murty is a citizen of India, the country of her birth and parent’s home,” the spokeswoman said in a statement. “India does not allow its citizens to hold the citizenship of another country simultaneously.
“She has always and will continue to pay UK taxes on all her UK income.”
But as opposition calls grew, Murty announced Friday she will start paying UK tax on “all worldwide income.”
In a statement, Murty said she did not want her non-domiciled status to be a “distraction” for her husband.
“This means I will now pay UK tax on an arising basis on all my worldwide income, including dividends and capital gains, wherever in the world that income arises”.
Murty stressed that she was making the change “because I want to, not because the rules require me to”, adding that the new arrangements will begin “immediately”.
“To smear my wife to get at me is awful,’’ Sunak was quoted as saying. “Every single penny that she earns in the U.K. she pays U.K. taxes on, of course she does. And every penny that she earns internationally, for example in India, she would pay the full taxes on that.”
Sunak said Murty was entitled to use the arrangement because she is an Indian citizen and intends to move back to her home country at some point to care for her aging parents.
But the opposition Labour Party rejected Sunak’s explanation, given that Murty has lived in Britain for many years and is married to one of the most powerful men in the country. Sunak and his wife also live in an official government residence that comes with his job as Chancellor of the Exchequer.
“In the end, we have somebody who’s been living here for eight years, raising her children here, living … in accommodation provided by the taxpayer and aspiring to be the wife of the next prime minister, and yet she says that she isn’t a permanent resident of this country,” Emily Thornberry, Labour’s spokeswoman on legal issues, told the BBC.
“What’s relevant is that she’s of the 0.1% of the population who have positively chosen to say that although they’re living here, they’re not living here permanently, and taking advantage of that decision in order to not pay as much tax,” she said.
With inputs from AP, AFP, Reuters