The big news out of the UK this week was the jaw-dropping revelation that Akshata Murty, the wife of the UK’s Chancellor of the Exchequer, Rishi Sunak, is “non-UK domiciled” for tax purposes. This means she does not pay UK tax on her worldwide income despite living in Number 11 Downing Street, rent free, paid for out of the public purse.
She claims domicile in India where she was born and her parents live.
She says she will now pay full UK taxes on her worldwide income but the UK's Guardian newspaper reports that Murty will retain her non-dom status:
"which could in future allow her family to legally avoid an inheritance tax bill of more than £275m".
India does not have an inheritance tax.
The Guardian reports that:
“Under non-dom rules, Murty did not legally have to pay tax in the UK on the estimated £11.5m (CAN$18.6M) in annual dividends she collects from her stake in Infosys, her billionaire father’s IT business. UK tax residents would be expected to pay about £4.5m (CAN$7.2M) in tax on the dividend payment.”
It was an astonishing admission. But, in one sense, it didn’t surprise me. The super-rich have long benefitted from complex rules designed specifically to lighten their tax burden – or eliminate it entirely.
The late New York real estate heiress, Leona Helmsley, famously remarked
"only the little people pay taxes."
Then she went to jail.
Here there is no suggestion Murty broke the law, only that she used the arcane rules on domicile to her clear advantage. It is estimated that Murty may have avoided paying £20M (CAN$32.4M) to the UK Treasury, which her husband heads as Chancellor of the Exchequer.
Despite saying yesterday that she would be paying UK tax in future on her worldwide income there are still questions to answer.
Time to get rid of non-dom status
But after this latest scandal it is surely time for the UK to get rid of its special category of taxpayers, the non-doms, which is an absurd hangover from the days of Empire.
We know the overwhelming majority of UK taxpayers play by the rules.
The super-rich, by contrast, play the system.
Updated and this from the Observer 10 April 2022: Top Conservatives say Rishi Sunak's chances of becoming Prime Minister are over. And from Andrew Rawnsley: The Stench of Entitlement