Akshata Murty, the wife of British Chancellor Rishi Sunak and daughter of Infosys Co-Founder NR Narayana Murthy, has come under scrutiny after the Guardian had revealed that her investments were funnelled through Mauritius to avoid taxes in India.
The development has raised the proverbial hornets’ nest in the United Kingdom, as Sunak despite being a public official failed to declare his family wealth in the ministerial register.
Extent of Akshata Murty’s wealth
As per Moneycontrol Research data, Murty holds 38,957,096 fully paid up equity shares in Infosys till the quarter ending September 2020, which as per share price of Rs 1,100.55 on November 27, 2020 is worth Rs 4,287.42 crore.
Murty’s shares in Infosys are worth 430 million sterling pounds – making her richer than the Queen, The Daily Mail reported while quoting the Sunday Times Rich List.
Why is the issue?
According to the Guardian, Murty bought a 5 percent share in International Market Management (IMM) for 500,000 sterling pounds in 2014. IMM funnels investments through a “letterbox” in Mauritius to reduce taxes paid in India. And while not illegal, this system is controversial.
What is IMM?
IMM was founded in 2014 by David Stewart. Funding for the company was raised from “a group of wealthy friends” among which Murthy owns 5 percent, Guardian quoted documents stating.
The company follows a structure wherein investments are funnelled through an intermediary company – called IMMASSOCIATES Mauritius, to then invest in two Indian subsidiaries which operate restaurants in India.
IMM is thus using Mauritius’ status as a tax haven to invest in dozens of restaurants in India – including Wendy’s and Jamie Oliver’s businesses, while reducing payable taxes on profits in India, investigations by the Indian Revenue Service and the Independent Commission for the Reform of International Corporate Taxation found.
Guardian said the documents it saw showed IMM is “aware of the tax advantages” as it had checked boxes “yes” and “India” to seek advantage of Mauritius’ network of double taxation agreements.
What taxes are avoided?
>> 20 percent capital gain tax is side-stepped in case the business is sold
>> Tax payable on dividends has also been cut by half from 10 percent to 5 percent
>> For now the tax benefits are not yet realised as IMM’s restaurants are yet to turn in profits.
Is it illegal?
According to Jasper Reid, CEO of IMM, the structure is a “standard approach to investing in India” and “nothing out of the ordinary”.
However, Alex Cobham, CEO of the Tax Justice Network was emphatic that “minimising Indian tax revenues is not a justification.” Cobham pointed out Sunak’s complicity adding: “India needs its tax revenues for schools and hospitals. We must hope that the chancellor himself is committed to the progressive taxation of wealth and top incomes, or the UK will only see the deepening of the stark individual, racial, gender and regional inequalities that the pandemic has laid bare.”
But Reid is not wholly wrong. Investments “routed” from Mauritius have cost India between $10-15 billion over the past 20 years in capital gains tax, dividend tax, interest tax and loyalty payments, Guardian estimated.
Why is it controversial?
>> For one, Sunak failed to declare “relevant wealth” which could “conflict with his duty to the public” as is required under the “ministerial code.”
>> Murty’s investments through IMM are funnelled by an intermediary company in Mauritius to invest in two Indian subsidiaries which operate restaurants in India and thus reduce payable taxes in India.
>> As stated by Cobham – evasion of taxes is not expected of a public official or Murty – who hails from India and holds huge financial interests in her father’s company.
>> Murty is part of her family office – Catamaran Ventures – funds from which benefit her, despite no financial or legal interest, another Guardian report noted.
>> For example, through Catamaran, Murty gains from Amazon Cloudtail’s 900 million euro revenues (as of FY19) – something that could be constituted as “conflict of interest” due to Sunak’s role requiring decisions on taxations of large digital corporations.
>> Catamaran also has combined family shareholding of 1.7 billion euros in Infosys which employs thousands in the UK and holds government contracts.
>> Through Catamaran, Murty also has direct holdings in at least six UK companies – Digme Fitness, Jamie’s Italian, Jamie’s Pizzeria, New & Lingwood, Soroco and Wendy’s.
Moneycontrol has reached out to Narayana Murthy and Catamaran Ventures for their response on the issue.