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Here is all you need to know about the controversy around Rishi Sunak, the leading contender to succeed UK PM Boris Johnson

The controversy arose after it was revealed in British media that Rishi Sunak's wife Akshata Murty had a non-dom tax status in the United Kingdom

Rishi Sunak, United Kingdom’s Indian-origin finance minister and the leading contender to succeed Prime Minister Boris Johnson, has been embroiled in a controversy after it was reported that his wife, Akshata Murty, may have evaded paying around Rs 197 crore in tax.

Rishi Sunak currently holds the office of the Chancellor of the Exchequer or Finance Minister of the United Kingdom, making him the country’s second most powerful government official. Boris Johnson appointed him to the role in February 2020. Some details about his background must be stated here in order to have a better understanding of him.

Who is Rishi Sunak

Rishi Sunak’s father is an Indian-born medical practitioner in the National Health Service of the United Kingdom, while his mother owns an independent pharmacy. In 2015, he was elected as a Member of Parliament from Richmond (Yorks). During the second term of former British Prime Minister Theresa May, he served as the Parliament’s Under Secretary. Following Boris Johnson’s election as the Prime Minister, the MP was appointed to the high-profile position of Chief Secretary to the Treasury in 2019.

Akshata Murty, the daughter of N.R. Narayana Murthy, the co-founder of Bengaluru-based IT services conglomerate Infosys, is Rishi Sunak’s wife. Akshata owns around 0.93 percent of Infosys, which is worth more than $1 billion at current prices.

What is the current controversy?

The controversy arose after it was revealed in British media that Akshata Murty had a non-dom tax status in the United Kingdom. This effectively indicates that dividends received from foreign corporations are exempt from taxation.

Akshata earns around Rs 11.56 crore in annual dividends from her interest in Infosys, and she claims a non-dom tax status in the country, which allows her to avoid paying taxes on the annual dividend advantages she receives from her Infosys holding.

Sunak, in his capacity as Chancellor of the Exchequer or Finance Minister, announced a series of tax increases that went into effect this month. So, at a time when the pandemic has caught everyone off pace and businesses are still reeling from the devastation, news that the Chancellor’s wife has been dodging British taxes has generated quite a bit of stir in the country.

Is Akshata Murty evading taxes?

Technically, Akshata is not dodging taxes since she has claimed non-domicile status, and the law does not require her to pay taxes on her earnings from outside the United Kingdom. Akshata’s representative also issued a statement stating that she pays taxes on all of her money earned in the United Kingdom.

Sunak has accused political opponents of “smearing” his wife in order to gain an advantage over him. He has also stated that she is eligible to employ the non-dom arrangement because she is an Indian citizen and intends to return to her native country to care for her parents in the future.

Sunak also alerted the British government and the Treasury about his wife’s tax status when he became a Minister, according to Reuters. Overall, Sunak’s wife appears to pay all of the taxes necessary under UK law. She is not required to pay taxes on her overseas income since the law of the land allows her to claim the non-dom status.

What is the non-dom status?

Non-dom, often known as non-domicile status, is a tax status that has been recognized in the United Kingdom since the French Revolution. It was first implemented in 1799. The status, a contentious element of colonial-era tax policy, applies to persons who are UK tax residents yet have their permanent abode outside the country.

Non-domicile status, however, is not automatically granted to foreign-born residents or non-citizens. They must seek tax exemptions on overseas income exceeding 2,000 Pounds. Akshata’s tax status in the UK was not mandatory, and she had to actively apply for non-dom status.

The debate around the non-dom status

The status of a non-dom is a disputed element of colonial-era tax law. It was first implemented in 1799, during King George III’s reign, with the goal of safeguarding the riches of a newly affluent class by exempting all of their foreign income from UK taxation.

To note, if such a privilege had not existed, British colonialists would have had to pay enormous taxes on the majority of their wealth amassed in colonies such as Jamaica and India.

Even now, the regulation continues to favor the country’s rich and powerful. According to the London School of Economics and the University of Warwick, more than two-fifths of UK tax residents earning 5 million pounds or more in 2018 claimed non-dom status at some point between 1997 and 2018.

Many of the highest-earning non-doms in the United Kingdom are well-known people, ranging from movie stars and athletes to top-earning bankers and businessmen.

What next for Akshata Murty?

Akshata offered a quick response to the controversy in a Twitter thread.

In essence, she claims to have paid taxes in the UK on money earned in the UK and taxes in other countries on income earned abroad. Because there has been so much debate about taxation, she stated that she has now decided to start paying UK taxes on all of her income, whether earned in the UK or elsewhere.

In her Twitter thread, she stated that she has attempted to keep her business life and Sunak’s political career separate. Now, because of public opinion pressure, she will pay all taxes as a matter of moral obligation.

Conclusion

The dispute has arisen at a time when the popularity of Rishi Sunak had grown and he was being considered a strong contender to succeed Prime Minister Boris Johnson. However, in recent weeks, he has received widespread criticism for his mini-budget, which was panned by critics for failing to address the country’s cost of living crisis, exacerbated by increasing electricity and fuel rates, as well as the coronavirus outbreak.

Analysts have also highlighted that the disclosure of Akshata Murty’s tax status could not have come at a worse moment, since Rishi Sunak’s popularity has plummeted as consumer prices have risen.

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Pallav
Pallav
Aristotelian and Platonic simultaneously.

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