Akshata Murthy tax row: Rishi Sunak in damage control mode

UK Chancellor of the Exchequer Rishi Sunak has been having a hectic month, what with all eyes on his undisclosed personal shareholdings and his wife Akshata Murthy's humongous wealth. Avoiding the glare is tough when your wife's foreign income, which comes from dividends of Infosys, becomes public knowledge and her residential status raises eyebrows.

It seems like folks in UK have had no idea that the Sunaks were pretty wealthy and they seem to be unable to digest the fact that Akshata Murthy might actually be richer than the Queen herself. 

Rishi Sunak. Photo: Reuters

Rishi Sunak was accused of not following the law as he had failed to disclose his personal interest (shareholdings) and his wife Akshata Murthy's large stake in Infosys. Her residential status as a 'non domiciled' citizen (non-dom) just came to light and UK citizens seem to be pretty offended.

Why? Akshata, like many other non-doms, gets to pay no taxes on her foreign dividend income in UK. This pinches the UK folks more because UK citizens have to pay a higher tax rate on the same, whereas she gets an exemption because of her domicile status, which is as per UK laws. 

Akshata receives about 11 million pounds (about Rs 113 crore) from foreign dividends, which are taxed in India and not the UK.

Why is it not charged in UK? Because Akshata chooses to pay a fee, which every non-domiciled person is required to pay, to retain this status of a non-dom, which in turn allows them to pay a lower fee instead of a higher tax and not pay taxes on foreign income (in Murthy's case, in India). Though this is legal as per British tax laws, the couple is being accused of having evaded taxes.  

The Sunaks. Photo: Getty Images

QUESTIONS SUNAK IS NOW FACING: 

The Sunak Family has to answer a few questions: 

1. Akshata's 'non-dom' status and tax on foreign income: Rishi Sunak is being questioned as to why Akshata should not pay taxes on all of her income on a backdated basis
2. Holding a US green card while being the UK Chancellor: Since Sunak also holds a US green card that he did not give up while becoming the Chancellor in UK, there are questions around why Sunak did not return the same. He has held his green card for 6 years (meaning since the time he was an MP) and US lawyers are now wondering how he presented himself to US Immigration since he is a British MP who also holds a residence in California.  
3. No mention of his personal investments: Sunak has not publicly declared the companies or funds that he has invested in and the locations of his investments.
4. No disclosure of his wife's investments: Though her wife's holdings in Infosys is public knowledge and is disclosed in the Infosys Financials in India, the same have not been declared in the 'Register of Ministerial Interests' in UK. Her possible holdings in other companies are unknown too.  
5. Sunak's power to change or influence tax laws: Sunak is known to have brought in tax breaks in April to benefit fund managers who are non-doms. Since his investments are unknown, there is no knowledge if his investments have benefitted from the new regime. Thus, a serious conflict of interest is being looked at.

Akshata Murthy holds shares in Infosys. Photo: Getty Images

WHY IS THIS A BIG DEAL?

Rishi Sunak has been accused of influencing tax policies for non-dom status holders and Akshata Murthy is being accused of using it to her benefit to not pay tax on her massive foreign income. Non-dom status holders also have to pay a fee for using this status; something which is pocket-friendlier for the rich than paying taxes on the foreign income. 

He is also facing scrutiny over his investments since his spokesperson has declined to talk about the jurisdiction in which these investments or arrangements were formed. 

It has also now come to notice that Sunak had decided to keep a US green card, which conferred him with permanent US residency. He held this for 19 months while being a UK chancellor and this also represents a conflict of interest since he works for the UK government.

SO, WHAT NOW?

As per The Guardian, Akshata Murthy has agreed to pay taxes on foreign income in UK for the coming years and for the income earned in the last year; but she would still hold the non-domiciled status. 

Along with that, Rishi Sunak has also asked UK Prime Minister Boris Johnson for an investigation into his own financial affairs.

Rishi Sunak, the UK Chancellor. Photo : Getty Images

SUNAK ASKS FOR FINANCIAL INVESTIGATION   

Rishi Sunak has asked Boris Johnson for a referral to Lord Geidt, who is an independent adviser. Sunak has requested a review of all his declarations since becoming a minister in 2018. Remember, he became an MP in 2015 and he has requested for a review of his declarations since the time he became a Finance Minister (i.e., 2018). So, the mystery about his finances between 2015 and 2018 still exists.  

Rishi is said to be confident that the review would find “all relevant information was properly declared” and was done on the advice of officials.

Today I have written to the Prime Minister asking him to refer my ministerial declarations to the Independent Advisor on Ministers’ Interests.I have always followed the rules and I hope such a review will provide further clarity. pic.twitter.com/JjVRDFJELl

The Labour Party's Deputy Leader Angela Rayner has written to PM Johnson and Lord Geidt, to understand:

1. If Sunak had ever benefitted from the use of tax havens
2. If he had received any updates on his blind trust since becoming Chancellor
3. Whether Sunak made a legal promise to the US when he received his green card that it was his permanent residence, and, if so, whether he was legally a permanent US resident when he entered UK Parliament and became a minister.
4. Whether the Chancellor and his family would provide “full transparency” on all their overseas income and where they pay tax on it.

MOVING OUT 

Rishi Sunak’s family has been staying at the flat above No 10, Downing Street, all this while. But it seems that Sunak's family has moved to their Kensington home. So now, Sunak is expected to stay in Downing Street during the weekdays and spend weekends in Kensington with his family. 

Why have they moved? Though it may seem that the move has come in because of the tax controversy, as per reports in The Guardian, the Sunaks want to be closer to their elder daughter’s primary school during her final term before she moves to boarding school.

After Akshata Murthy and Rishi Sunak shared a statement that Murthy would be paying UK tax on her worldwide earnings (even though she is not legally required to do so), there was news about Sunak considering quitting his job as the nation focussed on his family’s finances.