UK Chancellor of the Exchequer Rishi Sunak is under fire after UK media reports named him as the beneficiary of Cayman Islands and British Virgin Islands trusts.
The Independent reported on Friday that Sunak was listed as a beneficiary of trusts created to manage the business affairs of his wife Akshata Murty’s family interests in 2020, at a time when he was setting UK tax policy.
A spokesperson for Sunak said no one in the families of Murty or Sunak were aware of the alleged trusts, Reuters reported.
The reports came just days after Sunak was forced to defend his Indian wife’s non-domiciled tax status in the UK.
Under an arrangement, Murty, whose father is Indian billionaire Narayana Murty, only pays tax on her British income.
For a fee of GBP30,000, she does not have to pay tax on her foreign investment income, which, among other things, includes millions in annual dividends from a stake in IT company Infosys, founded by her father.
A tightening of the rules in 2015 means the non-dom status expires after 15 years, but sources cited by The Independent suggested that the trust structure would have perpetuated some of the benefits for much longer.
Murty claimed she relied on the non-dom arrangement because Indian law does not allow her to have dual citizenship in India and the UK.
Yet on Friday she announced she would pay UK taxes on all her worldwide income, so that her tax affairs would not become a distraction for her husband’s role as chancellor.
In another detail potentially depriving the UK of Sunak’s family’s tax revenue, the chancellor also admitted he was holding a US green card while he was in office, and used it for travel purposes, until October 2021.
Green card holders are typically taxed in the same way as US citizens on their worldwide income regardless of where they live. Green card holders must also express an intention to make the US their permanent home.
A spokesperson for the chancellor said: “Rishi Sunak followed all guidance and continued to file US tax returns, but specifically as a non-resident, in full compliance with the law. All laws and rules have been followed and full taxes have been paid where required in the duration he held his green card.”
It has been suggested that Sunak forego his ministerial salary for several months to remain under the US tax threshold for foreign earned income.
Although there is no suggestion that the tax arrangements of Sunak and his wife are illegal, and any benefits received from offshore trusts would be taxable where Sunak is a tax resident, the episodes have raised questions over the fairness of the British tax system.
Opposition leader Keir Starmer accused Mr Sunak of being guilty of “breathtaking hypocrisy” for raising taxes while his wife benefits from non-dom status.
The Labour Party called for full disclosure of Sunak’s tax affairs.
The chancellor’s latest budget was heavily criticised for not doing enough to tackle the rapidly rising cost of living in the UK, caused by a jump in inflation – especially the cost of energy.
Labour shadow transport secretary Louise Haigh said it was clear Sunak’s arrangements were legal.
But speaking on BBC Radio 4’s Today programme, she added, “I think the question many people will be asking is whether it was ethical and whether it was right that the chancellor of the exchequer, whilst piling on 15 separate tax rises to the British public, was benefiting from a tax scheme that allowed his household to pay significantly less to the tune of potentially tens of millions of pounds.”
The Guardian asked, if Sunak’s wife did not pay tax in the UK on GBP54.5 million in dividends from her shareholding in Infosys over the past seven-and-a-half years, how much tax did she pay elsewhere?
Although the chancellor said his wife pays full taxes on her overseas income, “for example in India”, the use of offshore structures may legally reduce the amount of tax paid.
The Observer said in an editorial that the financial affairs of Rishi Sunak were damaging to him personally, the government and the trust of citizens in the wider political system.
“Sunak’s wife appears to have reduced her tax liability through tax arrangements that call into question their household’s commitment to paying their fair share into the Treasury coffers that Sunak, as chancellor, is responsible for,” the opinion piece said.
The chancellor defended Akshata Murty in an interview with the Sun, saying it was unfair to attack his wife since she was a “private citizen”. He said, “To smear my wife to get at me is awful.”
He, in contrast, is an elected politician. “So I know what I signed up for,” Sunak said.
The Daily Mail reported on Sunday the chancellor had moved out of his official Downing Street No. 11 residence, after the leak of his wife’s tax affairs.
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