The chancellor, his wife and non-dom revelations

For Akshata Murty, a British resident whose holdings include a stake in the Indian multinational Infosys thought to be worth more than £ 500mn, to avail herself of the UK’s “non-domiciled” status is not surprising or untoward. The regime allows individuals to earn abroad without paying UK tax for up to 15 years. Any person should be able to make whatever arrangements they see fit within the law. But the fact that Murty’s husband, Rishi Sunak, is the chancellor of exchequer, who has ultimate responsibility for raising and collecting UK taxes, means that Murty’s tax affairs are, rightly, the topic of political discussion.

In recent decades, states competed to offer easy living and low-tax opportunities for the globally fleet-of-foot. A hyper-mobile elite were able to arrange their financial affairs to minimize their tax liabilities, with the willing consent of the political classes. Changing political mores are not only at work in the UK, but the issue is particularly fraught for the British Conservatives. A party that once championed the free and easy movement of global wealth now produces ministers who look like rabbits in the headlights when called upon to defend the idea that the tax system might seek to attract the wealthy.

The story also exposes the eccentricities of Britain’s non-domicile regime. Wherever Murty’s spiritual home may be, she is plainly now “domiciled” in Downing Street and her country of residence is the UK. It is unclear, too, whether the non-domiciled relief represents a good deal for either the exchequer or for so-called non-doms.

The Labor leader, Keir Starmer, however, is palpably wrong to say that Murty’s tax status reveals “breathtaking hypocrisy” on the part of the chancellor. The legal rights enjoyed by Murty are available to anyone who qualifies, and her right to use any means within the law to manage her financial affairs is no different from that of any other citizen.

Yet the defenses raised by the Sunaks stretch credulity. It is untrue to claim that it is only by actively seeking non-domiciled status in the UK that Murthy can retain her Indian citizenship. It is inadequate to say that the tax affairs of the chancellor’s wife are only of prurient interest, as some Conservative ministers have sought to do. Just as businesses have a legitimate right to ask employees to disclose conflicts of interest, the British electorate has a justified concern in the tax affairs of their chief finance minister. And it is disingenuous for Sunak to say that Murty’s financial arrangements are a product of her feelings about which country she really calls home. That Sunak and Murty both have held green cards, under which the bearer makes an undertaking to make the US their permanent home, further undermines Sunak’s case, particularly as his status as a US resident stretched into his time as chancellor.

Sunak’s misguided defense of his spouse serves nobody well. It does not facilitate a healthy discussion about how the structure, shape and scale of UK tax policy might be improved, or a reasonable debate about whether the UK has provided too warm a home to the ultra-rich, be they Russian oligarchs or otherwise. It has visibly failed, too, in its intended objective of quelling the chorus of criticism being faced by the chancellor or his wife.

Revelations about the personal affairs of Sunak and his wife smack of politically motivated leaks. But that does not absolve the chancellor from having to explain why the UK’s non-domiciled regime works for the country and why it is legitimate for the global rich, including his wife, to use the system. If he feels the regime cannot be defended, he should reform it.

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