Sunak, non-dom and the cost-of-living: Are taxes paid fairly throughout society?
- Credit: PA
The fairness of tax laws in the UK and the loopholes which can be exploited have come under fresh scrutiny following revelations about the chancellor’s wife.
Akshata Murty, who is married to Chancellor of the Exchequer Rishi Sunak, has been accused of intentionally avoiding paying taxes in the UK due to her non-dom status.
While this is legal, critics have pointed out it comes at a time when the chancellor has increased the tax burden on the public as the cost-of-living soars.
Ms Murty has since announced she will pay UK tax on her worldwide income, saying in a statement: “I do this because I want to, not because the rules require me to.
“These new arrangements will begin immediately and will also be applied to the tax year just finished.”
However, the situation has given rise to wider questioning about how evenly tax obligations are spread across society.
Havering resident Alan Nichols, 79, said while he does not think rich people should pay over the top, they "should pay the equivalent of what the ordinary working man pays".
“What’s going on with these people over the years is they’ve let these things lapse, and people have been claiming this non-dom thing,” he added.
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Jon Cruddas, the Labour MP for Rainham and Dagenham, said raising taxes should be based on fairness, so "those with the broadest shoulders should take the greatest burden”.
He added: “Unfortunately, the last few weeks have clearly demonstrated that this isn't how the Tory government sees it.
"Fifteen tax rises for working families topped off by an unfair national Insurance hike when energy costs and inflation are racing contrasts with tax avoidance schemes for the wealthy.
“The revelations about the chancellor's wife living in the UK but not paying taxes here on overseas income leaves a bad taste."
Julia Lopez, Conservative MP for Hornchurch and Upminster, did not comment on Ms Murty’s recent publicity, but said income tax thresholds have been steadily raised under the Conservatives to reduce the burden on working people.
Ms Lopez added: “The chancellor has been open, however, about the difficult choices in front of us as we recover from the pandemic, including the need to tackle social care and the pandemic health backlog while not exacerbating substantial inflationary pressures.”
The Treasury and Romford MP Andrew Rosindell’s office were also contacted for comment.
What is non-dom?
The news regarding Akshata Murty's non-dom status has thrust the term into the spotlight. But what does it mean, and how do people acquire it?
David Bransbury, tax director at Romford-based firm Clemence Hoar Cummings, said the concept goes back to the Napoleonic wars, when new taxes were invented to fund them.
The definition is complicated, but David said you inherit it from your father. Essentially, he said, it boils down to whether you are in the UK temporarily and if there is a good chance you will leave some time in the future.
David said: “You pay UK tax on income earnt in the UK and any overseas income sent into the UK.
“However, you do not have to pay tax on overseas income kept overseas, and this is a big difference compared to someone whose family has always resided in the UK.
“For the first seven years there is no charge for using this relief. After seven years, you have to pay £30,000 per year for the privilege. This increases to £60,000 after 12 years. So, it is not cheap.
“After 17 years of being in the UK, you can’t use this relief and have to pay tax on your worldwide income.”
The owner of Spirit Cellar in Collier Row, Vijay Rughani, said he understands that people in the top bracket “feel like they’re being hard-done-by”, and that “we all want to keep hold of our money”.
However, the 55-year-old added that there is a need for everyone to properly pay their taxes.
He said: “I suppose from the government’s side, they have to balance the books in terms of treating everybody correctly, so I guess from the government’s side they feel that what they’re doing is right.”
This is particularly pertinent right now, given, as Vijay puts it, “expenditure is huge”.
Overall though, he said he believes tax rates currently feel “about fair”.
While admitting she does not have particular knowledge on tax issues relating to the very rich, 42-year-old Sonia Khatun said she has concerns about how tax increases are exacerbating the cost-of-living crisis.
She said the hike of various taxes, such as council tax, have had a big impact, given everything else going on.
“Salary is not high, but everything is a really high price,” she said.
In particular, she has noticed how her shopping has risen from £100 to £130/£135 a week, a damaging increase alongside tax hikes.
“How do people survive, I don’t know,” she added.
HR case work adviser Dean Smith said although the national insurance hike has been tough along with other rising costs, including taxes, “generally, I think it (tax rates) is okay”.
On whether he believes the richest in society should be bearing more of the brunt, he admits: “It’s a difficult one."
He said: “It’s tough, because I think in some ways if they worked hard to get into a position of responsibility and are earning good money, is it fair to keep on taking more money from people who have really worked hard?
“I don’t like the idea of people avoiding tax, such as what’s been alluded to with Rishi Sunak’s wife, but it’s tough.”