What is plaguing Rishi Sunak?

UK's Chancellor of the Exchequer Rishi Sunak was tipped to be UK's next PM, but that looks like a distant possibility now. (Source: AFP)

What’s going on with Rishi Sunak? Sunak, who is the Chancellor of the Exchequer, or the chief finance minister, is being asked why his wife is avoiding British taxes.

His wife is Akshata Murty, non? Yes, daughter of Infosys’ founder NR Narayana Murthy. 

Then, is she? Is she what?

Is she avoiding UK taxes? Hmmm. So she had given a short explanation in her Twitter thread. Basically, she says that she has been paying taxes in the UK for income earned in the UK, and taxes abroad for income earned abroad. Since there was so much fuss made around this taxation thing, she has decided to start UK taxes on all of her income–whether she earned it from the UK or abroad–effective immediately… even for FY21-22.

Also read: Rishi Sunak, Akshata Murty move out of Downing Street

Did she have to do it? Not legally. She wrote in her Twitter thread, “I do this because I want to, not because the rules require me to”. That, she has tried to keep her professional life and Sunak’s political career entirely separate. That said, there was the pressure of public opinion… sort of like a moral pressure, to do this.

Why moral? So, as the Chancellor of the Exchequer or the finance minister, Sunak announced a series of tax hikes, which came into effect this month. He has frozen thresholds for nontaxable income till 2026, that is… income tax will have to be paid for income above £12,570 (Rs 12.4 lakh) and a higher tax will have to be paid for income above £50,270 (nearly Rs 50 lakh). Then, he has raised people’s contributions to National Insurance, which is a fund that takes care of social security needs such as pension and unemployment benefits. Next April, in 2023, there will be an increase in corporation taxes too. The UK’s Office of Budget Responsibility (OBR), which is a government-funded body that issues commentary on public finances, has said that 1.3 million more will pay income tax and that it will raise the country’s tax burden by 2% of GDP by 2024-25. The Institute for Fiscal Studies (IFS) has said that this 2% of GDP increase in taxation is “large by historical standards”.

People do hate taxes. So why did he? Did he what?

What’s with you today?! Raise taxes?! Oh… it’s just that the pandemic threw everyone off their game. To help businesses recover from its massive impact, Sunak had given large tax cuts to businesses. In fact, he and the UK PM Boris Johnson have been calling themselves “tax-cutting Conservatives”... though think tanks like the IFS have said that taxes have gone up under Johnson or since 2010, even to a level equivalent to what they were under the Labour PM Tony Blair. In an observatory note, they wrote, “his (Sunak’s) tax policy has been characterised by large temporary tax cuts – targeted primarily at providing immediate support to sectors hit hardest by the economic effects of the COVID-19 pandemic – coupled with even larger (and permanent) tax rises, backloaded to the final years of the parliament”.

Anyway, it was the tax cuts during the pandemic that seems to have made these recent tax increases necessary.

Also read: Why Britons are unhappy with Rishi Sunak for all the wrong reasons

Just the tax hikes and people are out for blood! It’s also the timing…

Meaning? This tax hike comes in the middle of rising inflation… it is 6.2% and the Office of Budget Responsibility (OBR) predicts it will be at 7.4% this fiscal, with a peak of 9%! 

Where does Akshata fit in then? If people and businesses are short of money, and they are being taxed more, then they are likely to get angry that the Chancellor’s wife has been avoiding British taxes. It doesn't help that an AFP report claimed that she is richer than Queen Elizabeth II, and it comes from her holdings in Infosys...

It's more than the Queen's wealth? It seems to be worth nearly about a billion dollars and the Queen has about £350 million to her name.