Wife of British finance minister Rishi Sunak agrees to pay tax on foreign income

Akshata Murthy, the wife of British finance minister Rishi Sunak, said on Friday that she would stop opting out of paying British tax on her foreign income – bowing to pressure on the issue.

The public anger over Ms Murthy’s tax status has been heightened by her husband’s decision to increase payroll taxes at a time when surging inflation leaves Britons facing the biggest cost-of-living squeeze since records began in 1956.

Ms Murthy, an Indian citizen, is eligible for so-called “non-domiciled” status in Britain, something available to foreign nationals in Britain who do not regard it as their permanent home. That in turn allowed her to opt to pay UK tax only on income she earned in or transferred to Britain.

Ms Murthy is the daughter of one of the founders of Indian IT giant Infosys and owns about 0.9 per cent of the company – entitling her to a dividend payment worth £11.6 million (about €14 million) last year.

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In a statement late on Friday, after two days of critical media coverage, Ms Murthy said she would pay British tax on her global income, including dividends and capital gains, for the 2021/22 tax year and in future.

“I understand and appreciate the British sense of fairness and I do not wish my tax status to be a distraction for my husband or to affect my family,” she said.

Ms Murthy said her previous tax arrangements were "entirely legal", and that she would continue to claim India, not Britain, as her domicile. Mr Sunak previously said she intended to return to India to care for her parents when they become infirm.

Mr Sunak has been touted as a successor to prime minister Boris Johnson, whose own position has come into question after widespread criticism over 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, Mr Sunak’s poll ratings have plunged as he faces challenges on many fronts, with the tax burden due to reach its highest level since the 1940s.

‘Politically motivated’

Earlier on Friday, Mr Sunak said in an interview that his wife’s financial investments were separate from his, and that questions about his father-in-law’s wealth and his wife’s tax arrangements were politically motivated attempts to damage him.

“To attempt to smear him, to smear my wife to get at me is awful, right?” Mr Sunak told The Sun newspaper.

Non-domiciled 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.

Britain's opposition Labour Party – which has called for the end of non-domiciled status – said Ms Murthy should also pay back the British tax she had avoided in previous years if she was genuine in now accepting her tax arrangements were unfair.

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

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

Mr Sunak also confirmed media reports that he only gave up a "green card" for the United States – an immigration status intended for permanent US residents – after he became Britain's finance minister in 2020.

A spokesperson for Mr Sunak said he had paid his taxes in full and not broken any laws or regulations. – Reuters