Tax Domicile and the citizen of nowhere

I don’t usually write about tax here, but the tax status of the UK Chancellor has changed that.

After the Brexit referendum, Teresa May in a speech said:

“Today, too many people in positions of power behave as though they have more in common with international elites than with the people down the road, the people they employ, the people they pass on the street … but if you believe you are a citizen of the world, you are a citizen of nowhere. You don’t understand what citizenship means.”

So how should we view the issues around the tax status of the Chancellor and his wife which have emerged. And yes, normally the tax affairs of a politicians spouse shouldn’t interest us, but the specifics of this situation are important.

If reports are correct the wife of the Chancellor, Akshata Murthy, has filed her tax returns as a non domicile for UK tax purposes as she is allowed to. As the government website makes clear “UK residents who have their permanent home (‘domicile’) outside the UK may not have to pay UK tax on foreign income.”

The point is “permanent home” with the implication that this is where you will return after your stay in the UK (questions of citizenship are irrelevant, it is where you regard your permanent home to be). So how can one spouse in a marriage have a permanent home outside the UK and the other not, unless of course they are going to either split up or both return to the permanent home outside the UK?

The problem here is that Mr Sunak is the Chancellor and was seen as potential Prime Minister. But can he hold these posts if his spouse doesn’t regard the UK as her permanent home and doesn’t pay tax on her considerable non UK income?

Then it is reported Mr Sunak still holds a US green card. To quote Homeland Security

“A Green Card holder is a permanent resident that has been granted authorization to live and work in the United States on a permanent basis. As proof of that status, U.S. Citizenship and Immigration Services (USCIS) grants a person a permanent resident card, commonly called a “Green Card.”

So, Mr Sunak can live and work in the US on a permanent basis (he is a permanent resident of the USA) and his spouse has her permanent home in India.

Lets go back to Teresa May,

“Today, too many people in positions of power behave as though they have more in common with international elites than with the people down the road, the people they employ, the people they pass on the street … but if you believe you are a citizen of the world, you are a citizen of nowhere. You don’t understand what citizenship means.”

Given their status for tax purposes are the Sunaks, in fact, “citizens of the world” or as May goes on to say, “citizens of nowhere”? And more importantly should the Chancellor of the Exchequer have this status given his role in tax policy and the economic future of the UK?

Again, to quote May, does he understand what citizenship means, or is he one of those people in power who “behave as though they have more in common with international elites than with the people down the road, the people they employ, the people they pass on the street”?

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