Rishi Sunak’s wife was forced to change her tax status on Friday, announcing that she would pay UK taxes on all of her income after the chancellor had defended her “non-dom” status.
Sunak has faced harsh criticism from MPs and tax experts over the revelation this week that his wife Akshata Murty held non-domiciled status in the UK, allowing her to earn money abroad without paying UK tax for up to 15 years.
On Friday evening, Murty announced she would pay UK tax on all of her worldwide earnings out of a “British sense of fairness”, acknowledging that the two days of criticism had become a “distraction” for her husband.
Murty said: “I have paid tax in this country on my UK income and international tax on my international income. This arrangement is entirely legal and how many non-domiciled people are taxed in the UK.”
Earlier on Friday, Sunak was forced to respond to media reports and admit that until last October he had held a US green card, an American permanent residence document that requires holders to file US tax returns.
Senior Conservatives said they believed Johnson’s allies had been behind some of the negative comments about the chancellor’s wife, but at a Downing Street press conference on Friday, the prime minister said Sunak was doing an “absolutely outstanding job”, and denied that briefings about Murty’s tax status originated from his office. “If there are such briefings they are not coming from us in Number 10,” he said.
Asked about Sunak’s green card, Johnson said: “As I understand it the chancellor has done absolutely everything he was required to do”.
But one senior MP said they were “99 per cent” certain the prime minister’s office was involved, while another said they suspected Sunak was in “a lot” of trouble because “it’s Number 10 going for him”.
Sunak was widely considered the favourite candidate to succeed Johnson if the prime minister was forced to resign over the “partygate” scandal, but the chancellor’s political standing has tumbled following last month’s Spring Statement.
An Ipsos Mori poll taken earlier this week showed his net popularity had dropped to -18, the lowest since he became chancellor.
Opinion within the party was split on whether the scandal over his tax arrangements and revelations about his green card have ended his leadership hopes.
One well-placed Tory party insider said “I wasn’t expecting Rishi’s demise to be so quick.” But an influential MP said “I don’t think this is fatal. But it chips away at his credibility,” adding “he is on the firing line for his apparent lack of transparency and dishonesty over this issue”.
On Thursday Sunak defended his wife, branding the criticism of her tax arrangements as “unpleasant smears”. He said that Murty “loves her country like I love mine” and “to smear my wife to get at me is awful”.
He added that Murty, who owns an estimated £500mn stake in Indian technology company Infosys, which was founded by her father, was “100 per cent doing everything this country asks of her” in terms of following the law and paying taxes.
Earlier this week, her spokesperson said that as a citizen of India, she was unable to hold citizenship of another country, “so, according to British law, Ms Murty is treated as non-domiciled for UK tax purposes”.
But several tax experts said the explanation that Murty’s non-dom status was based on her Indian citizenship was “disingenuous”, pointing out that she would have actively chosen to be a non-dom for tax purposes.
Sir Keir Starmer, the opposition Labour leader, said Sunak had “very serious questions to answer” about his wife’s tax affairs. “We need complete transparency on this so that we can all understand what schemes she may have been using to reduce her own tax,” he said.
An ally of Sunak said the chancellor was taken aback by the attacks on his wife and felt he needed to defend her. “He just doesn’t think policy should be like this”, they said.
Sunak’s spokesperson on Friday confirmed an earlier Sky News report that the chancellor had held a green card for a full year-and-a-half after he was appointed, insisting that “all laws and rules have been followed and full taxes have been paid where required in the duration he held his green card”.
The revelation about his green card prompted further concerns about his openness about his family’s circumstances. One senior Tory MP said the row over Murty’s tax arrangements suggested Sunak had poor political judgment.
“This may be legal, but this is essentially all about rich people saving money and that’s what it looks like to my constituents. How many people have £30k spare to spend on trying to save money on taxes? They are living in a totally different world.”
A former minister added that Sunak’s handling of the row had “not gone down well” among MPs.
“I care about the arrogant assumption that you shouldn’t have to be transparent or answer these questions honestly.”
But Tobias Ellwood, a Conservative MP, said the current rules relating to non-dom status were “out of date” and should be reviewed.
“There is nothing illegal about what has been done by the chancellor . . . If there are bigger, more fundamental questions about the existence of the non-dom status, that is something for us as a country, perhaps — and indeed parliament — to debate,” he told Sky News.”
However, one well-placed Tory party official said Sunak had reacted harshly to the story because of “oversensitivity” about his political aspirations, adding they thought he was “stuffed” unless he altered his tax arrangements.
“Because he’s chancellor and wants to be prime minister . . . she [Murty] should have a UK passport, pay as much tax as possible and he should focus on the big political prize.”