Hi, This is Hot Mic and I'm Nidhi Razdan.
Rishi Sunak was the rising star of the Tory Party in the UK. Only months ago, Britain's Finance Minister, Sunak, was being talked about as the man who was the favourite to replace Boris Johnson as Prime Minister. Johnson was at the centre of the Partygate scandal at the time, a scandal that has now seen both him and Sunak being fined by the police for attending parties during Britain's lockdown. But Sunak's ship sank before that as a scandal about his wife's wealth and her taxes brought both him and his family into the ugly spotlight.
So, what's the story? Well, over the last two years, as the pandemic hit jobs and businesses, Rishi Sunak's pledge to do 'whatever it takes' to help people made him hugely popular. He unveiled a support package of £350 billion, which helped his personal ratings soar amongst the public. His net favourability was around +30 by some polls.
But according to other pollsters, like Ipsos, it's now -18. The problems began in the spring when he presented a controversial mini-Budget in parliament that sharply raised taxes. This came at a time when a huge cost of living crisis has engulfed the UK thanks to soaring energy and fuel prices. Sunak was then being attacked for being 'out of touch' after media reports claimed that he had four luxury cars and not a modest hatchback as he had claimed. He faced ridicule after a staged photoshoot saw him awkwardly fueling a Kia Rio at a Sainsbury's petrol station. And then came the political bombshell that sealed his fate - that his wife Akshata Murthy potentially avoided paying up to £20 million in UK tax, which is almost 200 crore rupees.
Akshata Murthy and Rishi Sunak met as students at Stanford University in California. They married in 2009 and have two daughters. Akshata is the daughter of Infosys founder Narayana Murthy and she owns about 0.93% of the Bengaluru-based IT company. According to The Guardian newspaper, she receives about £11.5 million in annual dividends from her stake in the company. Now technically, Akshata has not broken any UK laws. She points out that she's exempt from paying taxes on overseas income in the UK because of her status as what is called a non-domiciled citizen. That basically means she's an Indian citizen and under British law she's considered as non-domiciled.
The Guardian says she's collected about £54.5 million in dividends from Infosys over the years and due to her non-dom status as it's called, that she was able to save about £20 million in UK taxes. Her spokesperson has said she's been paying UK taxes for any income generated within the country. Opposition Labour MPs have written to Sunak, however, asking if his wife paid foreign tax in India or in tax havens like the Cayman Islands - a claim that Murthy's spokesperson refused to comment on. It's not the first time such allegations have come forward.
The Guardian reported in 2020 that some of her investments were being routed through Mauritius to avoid taxes in India. So what is non-dom status? It's essentially a colonial era tax law which applies to people who are tax residents of the UK but have their permanent homes outside the country. They are not liable for taxes either in the UK or their homeland on their foreign income. But it's not cheap. Those who have resided in the UK for at least seven of the previous nine tax years have to pay £30,000 a year to the government.
Under British law, a non-dom will automatically be deemed domiciled if you reside in the country for 15 years. So yes, Akshata Murthy's tax arrangement is totally legal, but politics is about perception and that is where Rishi Sunak has taken a hammering. And then there's the green card. Sunak admitted that he had one until October of 2021, more than six years after he became an MP and over 18 months after he became the Finance Minister, known as the Chancellor.
Having a green card requires a pledge to make the US your permanent residence. So, was Sunak keeping a backup option in case politics in the UK didn't work out? Again, the perception not so great. Sunak has called the attacks on his wife unfair. Even invoking Will Smith in one interview where he said, "At least I didn't get up and slap anybody." His wife has not broken any laws, as we've been saying, but at a time when Sunak has raised taxes on ordinary Britons, the appearance that she dodged millions in taxes simply looks awful. Politics is, at the end of the day, all about perception and timing.