UK: Rishi Sunak's PM prospects fade amid wife's tax controversy
Until recently, Rishi Sunak, the UK's Indian-origin finance minister, was widely regarded as a top contender to succeed Prime Minister Boris Johnson. However, his popularity has dwindled in recent months by opposition attacks on his wife, Akshata Murthy, for failing to pay taxes amounting to £20 million due to her non-domicile tax status. Akshata Murthy is the daughter of Infosys co-founder Narayana Murthy.
- Non-domicile status is a contentious aspect of the colonial-era tax law that applies to people who are tax residents of the UK, but have their permanent homes outside the country and are thus not liable for taxes on their foreign income in either the UK or their homeland.
- This law was first enacted in 1799 with the intention of protecting the wealth of colonialists.
The backlash against Sunak and Murthy began when the UK government raised taxes during the pandemic. Sunak was accused of "breathtaking hypocrisy" by the opposition, who targeted him because of his wife's non-domicile status, which exempted her from paying UK taxes on her foreign earnings. The couple was also targeted when Infosys initially didn't close its Moscow offices after the Russian invasion of Ukraine.
Rishi Sunak was the clear favorite to be the next British Prime Minister. A month ago, he had a 35% chance of becoming PM, three times the odds of the next contender. However, Sunak's possibilities of becoming the next PM now have dropped to 1/3rd of what it was a month ago, at only 12%, as a result of his wife's tax controversy.
Reportedly, Murthy owns approximately 0.93% of the Bengaluru-based IT firm, which is valued at nearly $1 billion at current prices. She receives annual dividends of approximately £11.5 million (Rs. 11.56 crore) from her stake in the company. It's worth noting that Murthy is wealthier than the Queen, with a total estimated fortune of around £690 million (over Rs 6,834 crore).
Murthy has done nothing wrong in the eyes of British law — she is entitled to not pay certain UK taxes under the current laws. Despite this, she has now informed the BBC that she will begin paying UK tax on "all worldwide income." The British minister has accused his opposition of unleashing a "smear" campaign against his wife.
Sunak stated prior to his wife's announcement that "it would not be reasonable or fair to ask her to sever ties with her country because she happens to be married to me," since India does not allow dual citizenship. "She loves her country. Like I love mine," he said, adding that "every single penny she earns in the UK she pays UK taxes on."
After declaring her decision to pay UK taxes on foreign income, Murthy said that she did not want her husband to be distracted by her non-domiciled status. Being a non-domicile requires one to pay £30,000/year. She said she was changing her stance "because I wanted to, not because the rules required it," and that the new arrangements would go into effect "immediately."