Britain’s Chancellor of the Exchequer Rishi Sunak is fighting to douse a firestorm of criticism because his Indian wife Akshata Murthy only pays part of her taxes in the United Kingdom

Akshata, who’s the daughter of former Infosys’ Chairman N. R. Narayana Murthy, has an Indian passport and claims "non-dom" status in the United Kingdom which allows her to only pay tax on her UK income in Britain. Claiming "non-dom" status means that income from India or anywhere else would be taxed in that country and not in Britain even if she lives there almost all the year.

The row about Akshata’s tax status comes at a time when Sunak has been hiking taxes sharply to cover heavy government spending made to keep the economy going at the peak of the Covid-19 pandemic. Sunak recently presented a mini-budget in Parliament that has been attacked by the Opposition as hitting Britain’s poorest hardest. As the chancellor of the exchequer or the finance minister, he’s facing the main brunt of the criticism.

The Daily Mail’s blaring headline declared: “Non-dom status of Chancellor’s billionaire heiress wife means she could have avoided £ 4.4 million in UK tax last year and is only meant for people who ‘don’t intend to stay here permanently’.” Sixty-five per cent of readers responding to a poll by The Times branded Akshata’s tax status “immoral.”

Potential front-runner

Sunak has been seen as a potential front-runner to replace Prime Minister Boris Johnson should the prime minister leave office. But since presenting the government’s austerity measures on March 24, his popularity in the polls collapsed, sliding 24 points.

Johnson’s government has had to wheel out its heavy guns to defend Sunak who came under withering fire about his wife’s tax status in top newspapers and also on television and radio.

On Twitter, Sunak attracted nasty comments including one person who asked: “When does @RishiSunak intend to move to India? If he doesn’t intend to move to India at some point, it’s very hard to see how his wife can have told the truth to HMRC (the income tax department).

Johnson batted away questions about Akshata’s status, saying: “I think it’s very important in politics if you possibly can to try and keep people’s families out of it.”

Sunak's wife under fire

It’s the latest political controversy to embroil Sunak’s wife. A few days ago, the Opposition demanded to know whether the chancellor’s household was benefiting from money from Infosys that at the time was still maintaining a team in Russia to service global clients. Sunak called the perceived criticism of his wife “very upsetting” and said that neither he nor his family had any involvement in the company’s operational decisions. Infosys shut its Russian office a few days later.

He added he empathised with actor Will Smith who slugged US comic Chris Rock for joking about his wife at the Oscars. But he said: “At least I didn’t get up and slap anybody which is good.”

The government’s concerted defence of the chancellor included fielding Business Secretary (the rough equivalent of India’s Industries minister) Kwasi Kwarteng on early morning radio and TV news programmes to defend Sunak.

Kwarteng told interviewers that: “She has been very clear, she has been very transparent. The Chancellor’s been very transparent.” Kwarteng insisted that the focus on Akshata was “completely unfair”.

Sheltering or evading?

Kwarteng told interviewers who asked if Akshata was sheltering unfairly from taxes that, “I don’t think that’s true at all. Sheltering sounds as if you are evading things.”

Akshata holds just under a one per cent stake in Infosys thought to be worth about £ 730 million. Her father, mother and brother all have stakes in Infosys and Narayana Murthy retired for a second time from the company in 2014. Infosys shares have risen steeply in the last two years, riding the boom in the software services industry.

Akshata’s spokesperson defended her saying: “Akshata Murthy is a citizen of India, the country of her birth and her parents’ home. India does not allow its citizens to hold the citizenship of another country simultaneously.” She added: “So according to British laws, Mr Murthy is treated as non-domiciled for UK tax purposes. She has always and will continue to pay UK taxes on all her UK income.”

Sources close to Sunak also told the Daily Mail: “The Treasury has known about this all the time he has been there and when he became a junior minister in 2018, he went out of his way to provide extra disclosure to the Cabinet Office that was not strictly required.”

RNOR a magnet for the super rich

Britain has, for 200 years, had an unusual exemption clause in its tax system called variously Resident Not Ordinarily Resident (RNOR) or ‘Non-dom’ status which allows foreign passport-holders or people born abroad to only pay taxes on their UK income. RNOR status has acted as a magnet for many millionaires to base themselves in Britain. Many Indian businessmen are known to have moved to Britain and claimed non-dom status. One person named in The Times, London today was Lakshmi Mittal who made London main base in the 1990s from where he supervised a string of steel mills from Indonesia to Mexico.

Others who have claimed non-dom status include the Daily Mail owner, Lord Rothermere, who was born in France. Also it’s reckoned that one-fifth of the highly paid foreign bankers who work in London claim non-dom status.

Amendment to non-dom rules

Under withering criticism a few years ago, the British Government amended the non-dom rules, so that it is now only applicable for 15 years. The UK newspapers said that Akshata had been resident in the UK for nine years. She and Sunak met as students at Stanford University in California. Sunak was born in Britain and represents a Yorkshire constituency. He studied at Stanford and worked for a time in Goldman Sachs.

Sunak, who’s famous for using social media to promote government policies, has made things worse for himself recently by attempting to a pull off PR photo-op after the mini-Budget in which he was snapped filling petrol in a Kia Rio later. The car was later revealed to have been borrowed from a supermarket worker. Sunak was seeking to promote a fuel-duty cut which has done little to dent petrol prices at all-time highs. Newspapers did, however, report that Sunak, who’s a millionaire in his own right, paid for the petrol.