14 April 2022
Sunak’s Wife
A matter of misogyny.
By John Watson
Hypocrisy, tax schemes, the accusations come thick and fast; but before we get too excited about which politician has, or has a wife who has, a tax base which excludes their overseas income because they are not UK domiciled and whether that is appropriate, it is perhaps worth looking at why the non-domicile regime is there at all.
In the normal way, people fall within UK tax on all their income if they are resident here. There are a number of tests for that, one of them being whether they are here for more than 183 days in a tax year; another being whether, although they are here less than that, they regularly spend long periods in this country. For capital gains tax there is an additional head of ordinary residence. Of course the edges of the rules have been much litigated and of course one can dispute the detail but broadly if you live here or are here for a substantial proportion of your time, you are normally a full UK taxpayer.
Fair enough, you may think, and so it is, but tax policy is not just about fairness – it is about raising money and strengthening the economy. There is no point in having the fairest system in the world if it seriously reduces the amount to which that fairness is to be applied.
Put yourself now into the position of the UK government. You run a trading country which makes much of its GDP out of finance, sophisticated services and high-tech products. That GDP drives living standards, not just for the wealthy but for everyone. Funded public services, full employment, levels of benefits, they all depend on its health. No wonder that the Chancellor spends time considering how this engine of society can be enhanced and that he and his predecessors of both parties have come to the conclusion that the sectors on which GDP depends need to attract the brightest and best talent from around the world. Get the foreigners to come. That is the ticket and it is you, as a government, who must make their basing themselves here worthwhile. If you were brave, of course, you would simply rely on the attractions of the UK as a country, delightful people, good food, fine museums and theatres etc, and leave it at that. Of course foreigners should pay tax on their overseas wealth! That is the price they pay for coming here, dammit! In view of the huge cultural advantages, one would hardly expect them to be influenced by tax considerations. After all, if they didn’t come here they would have to live elsewhere and the rest of the world is, let’s face it, rather a dump.
A good example of this brave style of thinking can be found in France, in relation to their heavy regulation and labour law. “Tant pis” they exclaim from behind clouds of garlic smelling tobacco smoke. “Ze inconvenience is just a small price to pay for doing business in Paris, ze capital of Napoleon, ze most sophisticated city in the world.” Possibly, but have you noticed how much French you hear on the London streets. Their own people – not just foreigners but their own people – take one look at the French business environment and decide to set up elsewhere. Often somewhere convenient, say just the other side of the Channel. Why has Brexit not involved Paris replacing London as the European financial centre? Had they put energy into making it more attractive for business the story might have been different.
As talent becomes more mobile it becomes increasingly important for countries which wish to build high-tech industries to offer a good overall package, and different countries weight the package in different ways. The U.K.’s non-domicile regime targets foreigners with substantial overseas assets or earnings by (in return for a flat rate levy) excluding overseas income and gains from UK tax until or unless money reflecting the income and gains comes into the UK. So take Mr Indian Billionaire who would like to come and run his group from London, he may use his status as a foreigner, a “non-domiciliary”, to exclude his overseas income and gains from UK tax in return for a flat fee of £30,000 or £60,000 a year (depending on length of residence). Is that fair? Not really. He gets the benefits of being a UK resident without bringing all his income and gains into UK tax whereas we locals pay on the lot. Is it a good deal for UK taxpayers? Very likely. If it were not for the “non-domicile” rules he would not come here at all. As it is, the flat fee will probably pay for any state services he absorbs and, leaving aside any VAT on his personal expenditure, he will be reinforcing that crucial UK GDP and add to the momentum of London as a commercial centre.
In the end tax is about raising money to pay for schools, the health service and all the rest of it. It is good if it is fair as well, but politicians who buy fairness at the expense of yield are putting their own middle class niceties above the real needs of the population. If the treatment of non-domiciliaries substantially increases the overall tax take, that must justify it as a matter of policy. It does not, however, answer the question of whether it is appropriate for a politician to make use of non-domiciled status.
The point to note here is that whether you are UK or of foreign domicile depends on whether you are really British or just a foreigner living here and, if the answer is the latter, should you really have a major role in government? We are very internationally-minded as a nation but one can certainly see that the electorate and party members might baulk at major government offices being occupied by ministers who are not fully British. This no doubt is what lies behind the Chancellor’s wife’s decision. With her husband as Chancellor of the Exchequer, it would look bad for her to rely on a status dependent on her overseas nationality and origins, however much she may be entitled to it under the rules.
So she has taken a decision and rightly so, but there is still something in the matter which strikes one is a little odd. Back in the bad old days of the 19th century, a husband had control of his wife’s assets. That disappeared with the Married Women’s Property Act 1882 but some vestiges of the old system remained. Until not long ago a husband was responsible for tax on his wife’s income, something which was rightly abolished as demeaning to the status of women. It is curious, then, that a woman’s tax status should be seen as relevant to her husband’s political role. Why should his importance in the state dictate what she does or does not do with her own assets? I do not say this in criticism of Akshata Murthy. She, like many other wives, is willing to make a sacrifice for her husband’s career and that says something good about the health of their relationship. What surprises me is the attitude of the political press. Why are these leading advocates of feminism and women’s rights not baying with indignation that this sacrifice to her husband’s career is necessary in 21st century Britain? I do not know but it all seems very very odd.
