Akshata Murthy, the wealthy Indian wife of Britain’s Finance Minister, Rishi Sunak, has made a surprise announcement that she will, after all, pay British income tax on her worldwide income. Her about-turn is designed to end a row about what some saw as an attempt by her to avoid UK taxes by taking advantage of tax privileges that are within the law but politically awkward for her husband.
The outcry has severely damaged the political standing of Sunak, who until recently was seen as the favourite to succeed the embattled Boris Johnson as Prime Minister and leader of the Conservative Party.
'I Understand the British Sense of Fairness': Murthy
Murthy, whose father is the Infosys founder NR Narayana Murthy and who is super-rich in her own right, issued a statement late on Friday saying that while her tax arrangements were ‘entirely legal’, she accepted that many people saw her status as incompatible with her husband’s role as Finance Minister.
“I understand and appreciate the British sense of fairness”, she said, adding, “and I do not wish my tax status to be a distraction to my husband or to affect my family”. She said she would pay UK tax on all worldwide income, including for the financial year just over.
In the statement, Akshata Murthy also made clear that although she would not claim the income tax privileges it gives, she would keep her ‘non-dom’ [non-domicile] status. This means that she is not formally domiciled in the UK for tax purposes, and so, would not normally pay British tax on income earned abroad that stays abroad. The status is available to people who have lived in Britain for not more than 15 years and can argue that their permanent home is in another country. More than 200,000 UK taxpayers, almost all wealthy, currently have ‘non-dom’ tax privileges.
Murthy was born in Karnataka, remains an Indian national and is said to wish to return to India at some point. Her husband was born in England; his parents are from East Africa and his grandparents were Punjabis. They met as business students at Stanford University in California.
Amid Record Inflation, This Is Just Bad Timing
“Rishi has always respected the fact that I am Indian and as proud of my country as he is of his,” her statement added. “He has never asked me to abandon my Indian citizenship, ties to India or my business affairs, despite the ways in which such a move would have simplified things for him politically. He knows that my long-standing shareholding in Infosys is not just a financial investment but also a testament to my father’s work, of which I am incredibly proud.”
Sunak’s political credibility was badly damaged on Wednesday when news leaked about his wife’s tax status. On that same day, tax increases announced by Sunak several months ago took effect, even though inflation is now at record levels and fuel bills are soaring. The Labour opposition complained of Sunak’s “blatant hypocrisy” in levying higher taxes on ordinary people who can’t afford them while his wealthy wife appeared to be taking advantage of what many see as a tax dodge, however legal it might be.
As recently as February, Sunak was being tipped as Britain’s first Prime Minister of Indian heritage. Boris Johnson’s grasp on office seemed to be slipping amid a torrent of accusations that he and his key staff had attended parties that appeared to breach COVID-19 prevention rules. His Finance Minister – young, clever and patently sincere – was seen as well-placed to take over.
Sunak has expressed anger about the way his wife had been subject to public attacks. “To smear my wife to get at me is awful,” he told the Sun newspaper. Some of his friends complained of political “dirty tricks” designed to tarnish the Finance Minister’s chances of ever becoming Prime minister.
A Face-Saver Too Little, Too Late?
His wife’s change of heart about paying British taxes will ease the pressure but it may not be enough to restore Sunak’s political fortunes. Once a top politician loses a reputation for being squeaky clean and sure-footed, it’s difficult to regain that aura.
But, at least, the government will now – thanks to Akshata Murthy’s U-turn – have just a little bit more tax revenues to hand to deal with the acute cost of living crisis in which Britain is now embroiled.
(Andrew Whitehead is a former BBC India correspondent. This is an opinion article and the views expressed are the author's own. The Quint neither endorses nor is responsible for them.)