A Popular British Politician Falls From Grace Over a Tax Scandal

LONDON — Just two months ago, Rishi Sunak, a popular and rising British politician who is Chancellor of the Exchequer, seemed like a good bet to replace the country’s scandal-scarred prime minister, Boris Johnson.

Now Mr Sunak’s future is suddenly clouded by a whirlwind of revelations about his wealthy wife’s tax status, as well as the fact that he held a green card, allowing him to live and work in the US , for 19 months after becoming Chancellor, the highest finance post and the second most powerful post in the British government.

Even for a country accustomed to political turmoil, Mr. Sunak’s downfall was dizzying.

Mr Johnson, who himself pushed back on calls to quit at parties held at 10 Downing Street in breach of coronavirus restrictions, was forced to defend Mr Sunak and deny suggestions that his aides had seeded negative stories about him.

“It’s hard to imagine him making a successful bid for leadership anytime soon, or perhaps ever,” said Tim Bale, professor of politics at Queen Mary, University of London. “It may also be about the invulnerability and rights that affect someone who is so wealthy.”

Mr. Sunak’s wife, Akshata Murti, the daughter of one of India’s wealthiest businessmen, is claiming non-domiciled status in Britain which has saved her millions of pounds a year in dividend tax shares in his father’s technology company, Infosys. On Friday, Mrs Murty tried to defuse the crisis for her husband by announcing that she would start paying tax in Britain on his overseas earnings.

The quirky arrangement, although common for foreigners living temporarily in Britain, highlighted the couple’s extreme privilege. At a time when Mr Sunak is raising taxes to cover a pandemic-related public finance deficit, his gilded lifestyle has become a political liability, making him appear shockingly out of touch with ordinary Britons facing a brutal squeeze of the standard of living. .

“People liked Rishi despite the fact that he was ridiculously, fabulously rich,” Jill Rutter, a former Treasury Department official who is now a UK researcher in a changing Europe, told a think tank. “But being rich and coming across as a tax manipulator is something else.”

A normally posed politician, Mr Sunak, 41, was thrown off balance by the scrutiny. At first, he accused critics of unfairly “smearing” his wife. Given that 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, Mr Sunak argued in an interview with The Sun newspaper that it ‘wouldn’t be reasonable or fair to ask her to sever 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 think of giving up my British citizenship.”

There were two problems with this: Mr. Sunak’s green card effectively meant that he declared himself a permanent resident of the United States for tax purposes, long after he had become a congressman. (He waived the card before making his first visit to the United States as chancellor last October.)

Additionally, hundreds of thousands of Indian citizens live in Britain without non-domicile status. Ms. Murty paid 30,000 pounds, or about $39,000, for the classification; Tax analysts estimate it could have saved £20m, or around $26m, by paying tax on its dividends in a low-tax jurisdiction like India. (She has not confirmed where she pays these taxes.)

“Pretending she has to be non-domiciled to get 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 being felt in political terms against the Tories right now,” he said, “this one is really going to hurt.”

Opposition leaders have called on the government to investigate whether Mr Sunak breached the ministerial code of conduct. While Ms Murty has pledged to pay UK tax on her overseas earnings, she will retain non-domiciled status, which could allow her to avoid heavy inheritance tax.

Mr Johnson insisted on Friday that Mr Sunak was doing a “remarkable job”. But relations between them have cooled since party fury threatened the Prime Minister’s job – prompting speculation that Downing Street was circulating damaging details about him. Mr Sunak distanced himself from Mr Johnson during the previous scandal, and there was feverish speculation that he would move to oust the Prime Minister as leader of the Conservative Party.

But Mr Sunak held his fire, and events conspired to resurrect Mr Johnson’s fortunes while deflating his rival’s. Russia’s invasion of Ukraine has overshadowed the Prime Minister’s scandal, allowing Mr Johnson to trumpet his relationship with President Volodymyr Zelensky – whom he visited in kyiv on Saturday – and take a hard line against President Vladimir V. Putin. Mr. Sunak had to answer questions about why Infosys had not closed its office in Moscow. (He has since.)

Beyond that, Mr Sunak identified with economic and fiscal policies that impose heavy burdens on Britons. It’s a stark reversal of Mr Sunak’s earlier image as a benevolent paymaster, doling 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 come at the very time he is also being criticized for looking like Scrooge,” Ms Rutter said. “What does this say about the Chancellor’s judgment?”

The eldest son of Indian immigrants who attended elite Westminster School on scholarship, Mr Sunak is in many ways a role model for multi-ethnic Britain. After graduating from Oxford, he earned an MBA at Stanford, where he met Ms. Murty. He worked for Goldman Sachs and hedge funds before running for a safe Conservative seat in Yorkshire. Her father-in-law, Narayana Murthy, distributed leaflets to her. When Mr Sunak won, local newspapers called him the ‘Maharajah of the Yorkshire Dales’.

Now they are more inclined to ridicule Mr Sunak’s royal tastes. In 2020, he drew japes after being photographed with a $235 “smart cup” that keeps tea or coffee at a precise drinking temperature. Last month, a photoshoot was derailed when Mr Sunak appeared to have no idea how to refuel a car at a petrol station.

In the cut and thrust of British politics, this makes him vulnerable. The same newspapers that once speculated on Mr Sunak as prime minister-in-waiting are now wondering whether Mr Johnson will demote him in a cabinet reshuffle.

‘Rishi Sunak risks becoming one of those blown politicians’, Prof Bale said, ‘looks like they rise well but fall disappointingly low’.