A popular British politician falls from grace over a tax scandal

LONDON – Just two months ago, Rishi Sunak, a popular, burgeoning British politician who is Chancellor of the Exchequer, seemed like a good bet to replace scandal-stricken Prime Minister Boris Johnson.

Now Mr. Sunak’s future is suddenly clouded by a swirl of revelations about his wealthy wife’s tax status, as well as the fact that he had a green card, which made him chancellor 19 months after living and working in the United States, the highest-ranking financial position and the second most powerful job in the British government.

Even for a country accustomed to political turmoil, Mr Sunak’s fall was staggering.

Mr Johnson, who himself rejected calls for his dismissal over parties held at 10 Downing Street in violation of coronavirus restrictions, was forced to defend Mr Sunak and deny the suggestion that his aides had spread negative stories about him.

“It’s hard to imagine him making a successful bid for leadership anytime soon or perhaps ever,” said Tim Bale, a professor of politics at Queen Mary, University of London. “It may also speak of the invulnerability and justice that afflicts one so rich.”

Mr Sunak’s wife, Akshata Murty, the daughter of one of India’s wealthiest businessmen, claims non-domiciled status in Britain, which saved her millions of pounds a year in taxes on dividends from shares in her father’s technology company, Infosys. On Friday, Ms Murty tried to avert the crisis for her husband by announcing that she would start paying tax in Britain on her overseas income.

The original arrangement, while common for foreigners temporarily living in Britain, has spotlighted the extreme privilege of the couple. At a time when Mr Sunak is raising taxes to cover a pandemic-related deficit in public finances, his gilded lifestyle has become a political obligation, making him seem shockingly out of touch with ordinary Britons faced with a brutal pressure on the standard of living.

“People have loved Rishi despite the fact that he is ridiculously and fabulously rich,” said Jill Rutter, a former Treasury official and now a researcher at UK in a Changing Europe, a think tank. “But being rich and appearing to be a tax manipulator is another thing.”

A normally balanced politician, Mr Sunak, 41, has been thrown off balance by the scrutiny. At first, he accused critics of unfairly “smearing” his wife. As the Chancellor is responsible for setting UK tax policy, Ms Rutter said questions about Ms Murty’s tax status were both relevant and legitimate.

Then, in an interview with The Sun newspaper, Mr Sunak argued that it “wouldn’t be reasonable or fair to ask her to cut ties with her country because she happens to be married to me.”

“She loves her country,” he said. “As I love mine, I would never dream of giving up my British citizenship.”

There were two problems with that: Mr. Sunak’s green card basically meant that he declared himself a permanent resident of the United States for tax purposes, long after he became a member of parliament. (He gave up on the card before making his first visit to the United States as chancellor last October.)

In addition, hundreds of thousands of Indian citizens live in Britain with no non-domiciled status. Mrs. Murty paid £30,000, or about $39,000, for the classification; tax analysts estimate she could have saved £20 million or about $26 million by paying taxes on her dividends in a lower-tax jurisdiction like India. (She hasn’t confirmed where she pays those taxes.)

“Claiming that she must be non-resident to return home is a farce,” said Richard Murphy, an accountant who campaigns for tax justice. He predicted it would alienate voters. “Of the many things that are breaking through politically against the Tories right now,” he said, “this one will really hurt.”

Opposition leaders have called on the government to investigate whether Mr Sunak has violated the ministerial code of conduct. Although Ms Murty has promised to pay UK taxes on her overseas income, she will retain non-domiciled status, which could help her avoid hefty estate taxes.

Mr Johnson insisted on Friday that Mr Sunak was doing an “excellent job”. But relations between them have cooled since the fury over parties threatened the prime minister’s job – hence the speculation that Downing Street was spreading harmful details about him. Mr Sunak distanced himself from Mr Johnson during the earlier scandal, and there was feverish speculation that he would remove the prime minister as leader of the Conservative Party.

But mr. Sunak held his fire and events conspired to destroy Mr. Johnson while draining his rival’s. The Russian invasion of Ukraine has overshadowed the prime minister’s scandal, allowing Mr Johnson to talk out his relationship with President Volodymyr Zelensky — whom he visited in Kiev on Saturday — and take a hard line against President Vladimir V. Putin. Mr. Sunak was left to answer questions about why Infosys had not closed its Moscow office. (Since then that has happened.)

Furthermore, Mr. Sunak has become identified with economic and fiscal policies that impose heavy burdens on the British. It is a stark reversal from Mr Sunak’s previous image as the benevolent paymaster, handing out hundreds of billions of pounds in grants to protect people from the ravages of the pandemic.

“The problem for Rishi Sunak is that these issues are coming out, just as he is also being criticized for being Scrooge-esque,” ​​Ms Rutter said. “What does this say about the Chancellor’s judgment?”

The eldest son of Indian immigrants who attended the elite Westminster School on a scholarship, Mr Sunak is in many ways an example for multi-ethnic Britain. After graduating from Oxford, he obtained an MBA from Stanford, where he met Mrs. Murty. He worked for Goldman Sachs and hedge funds before running for a safe Conservative seat in Yorkshire. His father-in-law, Narayana Murthy, handed out pamphlets for him. When Mr Sunak won, the local newspapers called him the ‘Maharaja of the Yorkshire Dales’.

Now they are more inclined to criticize Mr Sunak’s royal taste. In 2020, he signed japes after being photographed with a $235 “smart mug” that keeps tea or coffee at a precise drinking temperature. Last month, a photo opportunity went off the rails when Mr. Sunak seemed unsure how to fill up a car at a gas station.

In the throes of British politics, that makes him vulnerable. The same newspapers that once speculated about Mr Sunak as prime minister are now wondering whether Mr Johnson will demote him in a cabinet shuffle.

“Rishi Sunak is at risk of becoming one of those souffle politicians,” said Professor Bale, “who looks like they’re rising nicely, but then collapsing disappointingly.”

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