The story so far: It was reported in British newspapers on Thursday, April 7, that Akshata Murthy, the wife of Indian-origin United Kingdom Finance Minister Rishi Sunak and daughter of Infosys co-founder Narayan Murthy, claims a non-domiciled tax status in the UK. Under British law, this essentially means that one does not have to pay taxes on dividend benefits received from overseas companies.
Who are Rishi Sunak and Akshata Murthy?
Rishi Sunak is the current Chancellor of the Exchequer or Finance Minister of the UK, the second most important government position in the country. Major political observers in the UK have pegged him as the next candidate for the Prime Minister’s position after the country's current leader Boris Johnson.
He was appointed to the position in February 2020 by Mr. Johnson, at a time when the pandemic-hit UK was facing its most difficult economic challenge since the 2008 recession and even the Second World War. It was simultaneously bracing for post-Brexit trading arrangements with the European Union to kick in.
Mr. Sunak’s father is an Indian-born general physician with the UK’s National Health Service (NHS), and his mother runs an independent pharmacy. He got elected as an MP from Richmond (Yorks) in 2015. He got his degree in Philosophy, Politics, and Economics from Oxford, and pursued an MBA from Stanford University.
He served at the Parliament Under Secretary level during former British PM Theresa May’s second term. He regularly supported the Brexit move and Mr. Johnson’s prime ministerial campaign. In 2019, after Mr. Johnson took charge, the MP was given the high-profile role of Chief Secretary to the Treasury.
In his term as the Finance Minister, the social-media-savvy politician, known for creating his own “brand”, has presented two national budgets and other interim financial statements.
While studying at Stanford, Mr. Sunak met Akshata Murthy, the daughter of N.R. Narayana Murthy, the co-founder of Bengaluru-headquartered IT services giant Infosys. Ms. Murthy has been residing in the UK since 2015. She worked at Deloitte and Unilever before going for the Stanford MBA. She now co-owns a London-based startup investment company called Catamaran Ventures UK with her husband.
Ms. Murthy also holds a 0.93% stake in Infosys, having $900 million (£690 million) to her name.
What is the recent controversy around Akshata Murthy’s tax payments?
At a time when UK citizens face the highest levels of taxation since the 1940s, major British dailies carried the news on Thursday that the Finance Minister’s wife claims a non-domiciled tax status in the country, which allows her to not pay taxes on the annual dividend benefits of £11.5 million that she receives off her stake in Infosys.
The Guardian reported that all other British taxpayers pay a 38.1% tax on dividend payouts. According to the daily, the non-domicile status was introduced in 1799. Under this, those not domiciled in the UK can avoid paying taxes on their overseas income received in the form of dividends, bank interests and foreign property rents. A person automatically gets deemed as domiciled after living in the UK for 15 years, and Ms. Murthy has been residing in the country since 2015.
The news kicked up a storm, giving rise to questions from Opposition MPs directed at the Chancellor and elicited a clarification from Ms. Murthy’s spokesperson.
Labour Party leader and opposition Treasury spokesperson, Tulip Saddiq said Mr. Sunak should come out and clear whether he benefited from the Infosys dividend payouts received by his wife.
Ms. Murthy’s spokesperson put out a statement on Thursday saying that she pays taxes on all her income generated within the UK.
"Akshata Murty is a citizen of India, the country of her birth and parent's home. India does not allow its citizens to hold the citizenship of another country simultaneously. She has always and will continue to pay UK taxes on all her UK income."
According to Reuters, a person familiar with the matter said that Mr. Sunak had informed the British government and the Treasury about his wife’s tax status at the time of becoming a Minister. The source also said that Ms. Murthy pays foreign taxes on her foreign income.
What was another recent row linked to the Ukraine crisis?
Just a few weeks before this, as trouble was intensifying in Ukraine as a result of the Russian incursion, another row unfolded over Ms. Murthy’s income from Infosys, when the company was still operating some of its functions in Russia.
Since Russian President Vladimir Putin launched the special military operation in Ukraine, the West and major European nations have retaliated with draining economic sanctions against Moscow, with a list of major global corporate giants such as Netflix, Shell, KPMG, PwC, Goldman Sachs and so on, pulling out of Russia.
Since the start of the Ukraine crisis, Mr. Sunak himself has regularly urged British companies to exit Russia to “inflict maximum economic pain” on the Vladimir Putin administration.
It was revealed in late March that Infosys runs a small part of its operations in Russia; Sky News had said that the company has a delivery office there and relations with the Russian Alpha Bank.
Opposition politicians from Labour and liberal parties, aside from the press mounted pressure on Mr. Sunak to answer “very serious questions” about Ms. Murthy’s stake in Infosys, which at the time had not shut down its operations in Russia.
The Treasury spokeswoman of the Liberal Democrat party, Christine Jardine, asked Mr. Sunak to put out a clarification. She said: “The public deserves full transparency on this issue. It cannot be one rule for the chancellor and another for everyone else.”
Labour Party’s Louise Haigh said it was “shocking” that the Chancellor’s family “itself was benefitting from business in Russia”.
When questioned on whether his family benefited from the Russian regime in a television interview on Sky News, the Finance Minister had said: “I don’t think that’s the case. I am an elected politician and I am here to talk about what I am responsible for. My wife is not.”
A spokesperson of Mr. Sunak had said that neither his wife nor her family members were empowered to make any operation decisions in Infosys.
The sparking of questions prompted Infosys to release a statement saying that it had a small team of employees based out of Russia to serve some of the firm’s global clients, adding that it did not have “any active business relationships with local Russian enterprises”.
The statement read further: "Infosys supports and advocates for peace between Russia and Ukraine and has committed $1m to relief efforts for the victims of war from Ukraine.”
As pressure kept mounting on the Chancellor, it was reported that Infosys eventually decided to move its services from Russia to its other global delivery centres,
- Rishi Sunak is the current Chancellor of the Exchequer or Finance Minister of the UK, the second most important government position in the country. Major political observers in the UK have pegged him as the next candidate for the Prime Minister’s position after the country's current leader Boris Johnson.
- In his term as the Finance Minister, the social-media-savvy politician, known for creating his own “brand”, has presented two national budgets and other interim financial statements.
- At a time when UK citizens face the highest levels of taxation since the 1940s, major British dailies carried the news on Thursday that the Finance Minister’s wife claims a non-domiciled tax status in the country, which allows her to not pay taxes on the annual dividend benefits of £11.5 million that she receives off her stake in Infosys.
