UK’s Sunak hits out at ‘smears’ over wife’s tax status

By Michael Holden

(Reuters) – British finance minister Rishi Sunak hit back at what he called “smears” about his multi-millionaire Indian wife over her tax status, in criticism that commentators say has damaged his chances of being the country’s next prime minister.

The row over the tax status of Sunak’s wife Akshata Murthy comes as Britons face the most severe hit to living standards since at least the 1950s, including a rise in taxes brought in by Sunak to help pay for the recovery from the COVID-19 pandemic.

Murthy is the daughter of Narayana Murthy, the billionaire co-founder of IT services company Infosys. She chose to hold non-domiciled status, which means she does not pay tax in Britain on earnings abroad.

In an interview with The Sun newspaper, Sunak defended his wife. He said Murthy, who owns about 0.93% of Infosys, loved her homeland and should not have to sever ties because she was married to him. She ultimately planned to return to India to look after her parents, he said.

“I would hope that most fair-minded people would understand — though I appreciate that it is a confusing situation that she is from another country.”

Sunak has been touted as a successor to Prime Minister Boris Johnson, whose own position has come into question after widespread criticism over illegal parties held at Downing Street during COVID-19 lockdowns and a series of other scandals.

After earning plaudits for a steady-handed response to the pandemic, Sunak’s poll ratings have plunged as he faces challenges on many fronts, with the tax burden due to reach its highest since the 1940s.

He also faced criticism this week for donating more than 100,000 pounds ($130,360) to Winchester College, his former private school whose annual fees are more than 43,000 pounds. His spokesperson said it was just one of the couple’s many philanthropic donations.

Opposition politicians have said Sunak had very serious questions to answer over Murthy’s tax status and even supporters of the governing Conservative Party said the disclosures were damaging.

“F. Scott Fitzgerald once wrote that the rich ‘are very different from you and me’,” the influential ConservativeHome blog said. “Has Sunak become sufficiently different not to grasp the bleak reality of his present position?”

The Telegraph newspaper described Murthy as being richer than Queen Elizabeth, while in its editorial, the Times said Sunak’s political fortunes, which had already taken a battering after he raised taxes, had been dealt another major blow.

“Mr Sunak’s chances of succeeding Mr Johnson look much-diminished now,” it said.

EVERY SINGLE PENNY

Murthy’s spokeswoman confirmed on Wednesday – the day that social security contributions rose for British workers and employers – that she was treated as non-domiciled for UK tax purposes, meaning she would not pay taxes in Britain on dividends from the Indian business.

“Every single penny that she earns in the UK she pays UK taxes on, of course she does,” Sunak told the paper. “And every penny that she earns internationally, for example in India, she would pay the full taxes on that.”

Non-dom status exempts more than 75,000 mostly foreign nationals in Britain from tax on overseas income and has been a target for tax campaigners as it overwhelmingly benefits the very rich.

Opposition parties have said what Murthy had done is legal but questioned whether it was right given Sunak’s tax hikes.

Johnson said he did not know Murthy held non-dom status, and rejected suggestions his own office had briefed against Sunak.

“Rishi is doing an absolutely outstanding job,” he said.

Sunak also said in a statement that he had held a U.S. Green Card when he became finance minister in 2020, before giving it back on his first official trip to the United States. His spokeswoman said all laws had been followed and he paid full taxes when he held the card.

Media reports said Sunak had stopped living in the US in 2013.

Sunak said his opponents were using his wife to attack him.

“To smear my wife to get at me is awful, right?” he said.

($1 = 0.7671 pounds)

(Additional reporting by Kate Holton and Andy Bruce, and Mrinmay Dey and Maria Ponnezhath in Bengaluru; editing by Angus MacSwan)