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7 April 2022

Rishi Sunak’s wife can’t defend her non-dom tax status

Akshata Murthy chose to become a non-dom — she bought membership of a tax discount club.

By Jolyon Maugham

I have a contact, someone I like, who is a political journalist and their partner works in a hugely politically sensitive part of government. “How do you manage?” I once asked them. “Well, you know,” they said, “we’re just respectful of one another’s careers and I try not to look over their shoulder when they’re working.”

This is the reality for lots of power couples. You avoid doing things you might want to so as not to create a conflict of interest and embarrass your partner. It’s part of the compact of your relationship. And being married to a billionaire, if you are Chancellor of the Exchequer, raises exactly these issues.

In our New Gilded Age, a key question of tax fairness is whether the kinds of income disproportionately enjoyed by the mega-wealthy (rents, interest, dividends, additions to the value of your assets) should be taxed at the same rate as the kinds of income ordinary people get (from selling our labour). So far, Rishi Sunak has answered this question by, for example, choosing to raise national insurance contributions on income from labour more than on income from assets.

Sunak has a bob or two himself, after a career at Goldman Sachs and as a hedge funder, though he holds his assets under, we are solemnly told, a blind trust. The idea is that he should not know what shares he holds so he can’t be accused of making decisions as Chancellor to improve his personal circumstances. The fact that Sunak set up such a trust shows that he understands the need to at least nod in the direction of managing his conflicts.

To be fair to Sunak, these first world problems are inherent in being a hugely wealthy Chancellor married to a billionaire. There is no avoiding them. But the news that his wife, Akshata Murthy, has non-domiciled status for tax purposes is on a different level to information hitherto revealed about the couple’s fortunes. It indicates that instead of choosing to avoid conflict, Sunak and Murthy have chosen to embrace it.

This is the key fact that Murthy’s explanation of her status overlooks. Her spokeswoman suggested she was a non-dom because of her Indian citizenship, but she had to choose to get the status. As a non-dom, she has to agree to pay an annual fee — think of it as buying membership of a tax discount club — for the privilege of not paying tax on her foreign income. She could instead have just paid tax on all her income like you or I do. The fact she is an Indian citizen ultimately has nothing to do with it.

If you were Sunak, how would you deal with the conflict raised by Murthy’s choosing non-dom status? To take but one of many examples, part 4 of the Constitutional Reform and Governance Act 2010 says that MPs and sitting peers can’t get non-dom tax relief. It may be that you think that the rule should be extended to catch the spouses of MPs, but the question is, how on earth Rishi can be trusted to answer that question when doing so would hit the family in the pocket?

Ultimately, the question I have is this. Why didn’t Sunak and Murthy, like the political journalist I mentioned, just manage it? They could have paid a little more tax and avoided this awful mess. Or did they just think they would get away with it? 

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