Explained | The Infosys asset controversy involving Rishi Sunak and his wife Akshata Murthy

Rishi Sunak and his wife have also come under fire recently over the latter’s stake in Infosys, forcing the company to shut down its Russian operations amid the Ukraine crisis.

Rishi Sunak and his wife have also come under fire recently over the latter’s stake in Infosys, forcing the company to shut down its Russian operations amid the Ukraine crisis.

The story so far: It was reported in British newspapers on Thursday April 7 that Akshata Murthy, the wife of Indian-born British Finance Minister Rishi Sunak and daughter of Infosys co-founder Narayan Murthy, is claiming non-domiciled tax status UK. Under UK law, this essentially means that one does not have to pay tax on dividends received from overseas companies.

Who are Rishi Sunak and Akshata Murthy?

Rishi Sunak is the current Chancellor of the Exchequer or Finance Minister of the United Kingdom, the second most senior government post in the country. Leading political observers in the UK have named him as the next candidate for prime minister after the country’s current leader, Boris Johnson.

He was appointed to the post in February 2020 by Mr Johnson, at a time when the pandemic-hit UK was facing its toughest economic challenge since the 2008 recession and even the Second World War. It was simultaneously preparing for the entry into force of post-Brexit trade agreements with the European Union.

Mr Sunak’s father is an Indian-born GP in the UK’s National Health Service (NHS), and his mother runs an independent pharmacy. He was elected MP for Richmond (York) in 2015. He graduated in Philosophy, Politics and Economics at Oxford and pursued an MBA at Stanford University.

He served at the level of Under-Secretary of Parliament during the second term of former British Prime Minister Theresa May. He has regularly supported the Brexit decision and Mr Johnson’s premiership campaign. In 2019, after Mr Johnson took office, the MP was given the high-profile role of Chief Secretary to the Treasury.

During his tenure as finance minister, the social media-savvy politician known for creating his own “brand” presented two national budgets and other interim financial statements.

While studying at Stanford, Mr Sunak met Akshata Murthy, the daughter of NR Narayana Murthy, the co-founder of Bengaluru-headquartered IT services giant Infosys. Ms. Murthy has resided in the UK since 2015. She worked at Deloitte and Unilever before taking the Stanford MBA. She is now co-owner of a London-based investment company called Catamaran Ventures UK with her husband.

Ms Murthy also has a 0.93% stake in Infosys, with $900m (£690m) to her name.

What’s the recent controversy surrounding Akshata Murthy’s tax payments?

At a time when British citizens are facing the highest levels of taxation since the 1940s, major British daily newspapers reported on Thursday that the finance minister’s wife is claiming non-domiciled tax status in the country, giving her allows it to pay no tax on the year of the £11.5m dividend it receives from its Infosys stake.

The Guardian reported that all other UK taxpayers pay a 38.1% tax on dividend payouts. According to the daily, non-domicile status was introduced in 1799. Under this, those who are not domiciled in the UK can avoid paying tax on their overseas income received in the form of dividends, bank interest and foreign real estate rents. A person is automatically considered domiciled after living in the UK for 15 years, and Ms Murthy has been resident in the country since 2015.

The news sparked a firestorm, prompting questions from opposition MPs to the Chancellor and prompted a clarification from Ms Murthy’s spokesperson.

Labor leader and opposition Treasury spokesman Tulip Saddiq said Mr Sunak should come out and clarify whether he benefited from the Infosys dividend payouts received by his wife.

Mr Murthy’s spokesman released a statement on Thursday saying she paid tax on all her income generated in the UK.

“Akshata Murty is a citizen of India, her country of birth and her parents’ residence. India does not allow its citizens to simultaneously hold the citizenship of another country. She has always and will continue to pay taxes British income on all his British income.”

According to Reuters, a person familiar with the matter said Mr Sunak informed the UK government and the Treasury of his wife’s tax status upon becoming a minister. The source also said that Ms Murthy pays foreign taxes on her foreign income.

What has been another recent dispute related to the Ukraine crisis?

A few weeks earlier, as unrest escalated in Ukraine following the Russian incursion, another row arose over Ms Murthy’s income from Infosys, when the company was still carrying some of its functions in Russia.

Since Russian President Vladimir Putin launched the special military operation in Ukraine, the West and major European countries have retaliated with grueling economic sanctions against Moscow, with a list of major global giants such as Netflix, Shell, KPMG, PwC, Goldman Sachs, etc. on, withdrawing Russia.

Since the start of the Ukraine crisis, Mr Sunak himself has regularly urged British companies to leave Russia to “inflict maximum economic pain” on Vladimir Putin’s administration.

It was revealed at the end of March that Infosys manages a small part of its operations in Russia; Sky News had said the company had a delivery office there and a relationship with a Russian bank Alpha.

Opposition politicians from the Labor and Liberal parties, in addition to the press, have been mounting pressure on Mr Sunak to answer ‘very serious questions’ about Ms Murthy’s stake in Infosys, which at the time time had not stopped its operations in Russia.

Liberal Democrat treasury spokeswoman Christine Jardine asked Mr Sunak for a clarification. She said: “The public deserves full transparency on this issue. It cannot be one rule for the chancellor and another for everyone else.

Labor’s Louise Haigh said it was ‘shocking’ that the Chancellor’s family ‘themselves are profiting from business in Russia’.

Asked if his family had benefited from the Russian regime in a television interview on Sky News, the finance minister said: “I don’t think that is the case. I’m an elected politician and I’m here to talk about what I’m responsible for. My wife is not.

A spokesman for Mr. Sunak had said that neither his wife nor his family members had the authority to make operational decisions in Infosys.

The sparks of questions prompted Infosys to release a statement saying it has a small team of employees based outside of Russia to serve some of the company’s global customers, adding that it has “no business relationships active with local Russian companies”.

The statement further read: “Infosys supports and advocates for peace between Russia and Ukraine and has committed $1 million to relief efforts for victims of the Ukrainian war.”

As pressure continued to mount on the Chancellor, it was reported that Infosys had finally decided to move its services from Russia to its other global fulfillment centers,