“Integrity and accountability is really important to me and clearly in this case there are questions that need answering. That’s why I’ve asked our independent adviser to get to the bottom of everything, to investigate the matter fully and establish all the facts and provide advice to me on Nadhim Zahawi’s compliance with the ministerial code,” said British prime minister Rishi Sunak as he ordered a probe into the tax affairs of the chairman of his governing Conservative Party.
The issue of Nadhim Zahawi’s taxes has been the topic of discussion and deliberation for quite some time now in Westminster and with Sunak ordering for a probe in the matter, it has finally come to a head.
Sunak has added that Zahawi would remain Tory Party chairman during the investigation and had agreed to “fully cooperate”.
At a time when he faces calls to step down, Zahawi welcomed the probe and said that he looked forward to “explaining the facts of this issue” to Sir Laurie Magnus, the prime minister’s independent adviser on minister’s interests.
Zahawi — who was the former Chancellor — in an interview to The Guardian on Friday, said that his tax errors were “careless and not deliberate”.
But, what exactly is the issue? Has Zahawi committed tax fraud? What’s the row all about? We take a deep dive and give you the answers.
What is the story about?
The rise and rise of Nadhim Zahawi is what movie scripts are made of. Born in Iraq, his family fled to Britain during Saddam Hussein’s regime. He didn’t know a word of English when he touched British soils, but grew up in Sussex.
In May 2000, Zahawi rose to prominence when he co-founded the polling firm YouGov. According to reports and documents, when YouGov started 23 years ago, a Gibraltar-based company, Balshore Investments Limited, was given 42.5 per cent shares — the same given to YouGov’s co-founder Stephan Shakespeare.
Zahawi took no shares himself. Balshore was held by a trust controlled by Zahawi’s parents; he has said that the shares went to Balshore in recognition of his father’s role in setting up YouGov through the provision of start-up capital and advice.
As per people who worked in YouGov, the role of Hareth Zahawi, Nadhim’s father, was limited to an informal way.
Evidence from 2005 also appears to show — at that point, before he became an MP — Nadhim Zahawi was benefitting from this offshore trust.
The question being asked is: Did Nadhim Zahawi’s father really merit such a big stake in the business or was it a way for the former Chancellor to avoid paying tax?
Spotlight on Zahawi’s finances aren’t new. In 2017, The Guardian had reported on Zahawi’s reported links to Balshore. Then in July last year, when Zahawi was appointed Chancellor by Boris Johnson, The Independent reported that his finances were under investigation.
Later, Dan Neidle, an independent tax expert, started to go through Zahawi’s business activities and reached the conclusion that Zahawi arranged for the shares that would otherwise have been his at YouGov’s founding to go to Balshore, and alleged that “the obvious rationale for this is tax avoidance”, a claim denied by the Conservative leader.
Multi-million pound settlement
Zahawi, the Conservative Party chairman, revealed on Saturday that he had made a payment to settle the dispute with HM Revenue & Customs (HMRC). This was because the HMRC had disagreed with the number of shares given to his father.
According to a report in the BBC, the leader paid a total of about £5 million (Rs 50.53 crore), including a penalty of 30 per cent, though Zahawi didn’t confirm the amount. He was quoted as saying, “So that I could focus on my life as a public servant, I chose to settle the matter and pay what they said was due, which was the right thing to do.”
He added that his father “took founder shares in the business in exchange for some capital and that the HMRC had accepted he was entitled to do so – but that “they disagreed about the exact allocation”. Because of this “careless and not deliberate” error, he said he had paid the penalty.
Also read: Sex, Booze and British MPs abroad: The latest controversy dogging Rishi Sunak
Opposition speaks up
Zahawi’s tax situation has become fodder for the Opposition, with Labour leader Sir Keir Starmer saying that launching an investigation was “not enough” and Zahawi could not stay on as Tory Party chairman.
“Everybody knows it’s wrong. He clearly isn’t going to resign and so the prime minister needs to show some leadership,” Labour Party leader Keir Starmer told reporters on Monday, adding, “This is a test of the prime minister. He promised us, his first words were integrity and accountability. Well, if those words mean anything, the prime minister should sack him and sack him today.”
Labour Deputy Leader Angela Rayner said, “We may have a carousel of ministers but it’s the same old excuses every single time. Reports that the then chancellor of the exchequer agreed a settlement with HMRC, including a penalty, raise serious concerns, not just about that case but standards in this entire government.”
With inputs from agencies
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