Sunak fires Zahawi for ‘serious’ ethical violation of taxes

(Bloomberg) — Prime Minister Rishi Sunak sacked Nadhim Zahawi, citing “serious” ethics violations after revelations about the Conservative Party chairman’s tax affairs made his position untenable.

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In a letter to Zahawi on Sunday, Sunak said the independent review of the case had been completed and that “it is clear that there has been a serious breach of the ministerial code. As a result, I have informed you of my decision to remove you from your position.

Zahawi had admitted he had been “careless” with his taxes and retroactively paid a multi-million pound bill with the country’s tax collector. That – and the revelation that he had also been fined taxes for not paying the right amount at the right time – led to mounting pressure from his own party for him to stop, or for Sunak to fire him.

The protracted controversy threatened to throw Sunak’s government off course, distracting from his stated priority to revive the moribund British economy, as well as his attempt to reverse the slump in the Tories’ prospects two years before a general election .

The situation enabled Labor leader Keir Starmer, whose party is currently well ahead of the Conservatives, to accuse Sunak of being “hopelessly weak” and to link the party chairman’s tax affairs to Sunak’s wife Akshata Murty, who so enjoyed so-called non-dom tax status in the UK.

Zahawi is the second cabinet minister to leave Sunak’s three-month-old government over ethics breaches, allowing Labor to rekindle allegations of ‘Tory Sleaze’. Gavin Williamson resigned as minister without portfolio in October after allegations he had bullied staff. Deputy Prime Minister Dominic Raab is the subject of an ethics inquiry following multiple complaints of bullying.

After initially assisting Zahawi, Sunak ordered the ethics review, saying his colleague’s Jan. 14 statement about his tax payments had changed the calculus. On Wednesday, he told the House of Commons it was right to let “due process” take its course and await the outcome of the inquiry, also suggesting that the easy option would have been to sack him straight away. Stephen Massey, chief executive of the Tory party, will take over party affairs on an interim basis until a successor to Zahawi is appointed.

According to Conservative MP Bim Afolami, Zahawi himself had been telling colleagues for days that he had done nothing wrong. But anger among Tory lawmakers grew. In a letter posted to Twitter on Sunday, Zahawi did not acknowledge the tax issue and vowed to continue supporting Sunak from the back seat.

A cabinet minister and several Conservative MPs said Zahawi should resign privately. On Thursday, a report in The Times suggested that Sunak was “furious” at Zahawi, a claim denied by the prime minister’s office.

Read more Sunak takes British cabinet retreat with Tories Gunning for Zahawi

Zahawi said in his January 14 statement that His Majesty’s Tax Office concluded that he had been “negligent and unintentional” in his tax affairs. His tax bill, which related to the sale of shares in the polling company YouGov that he co-founded, was £4.8 million ($5.9 million), including a 30% fine, according to a person familiar with the case . The settlement took place while Zahawi was finance minister in mid-2022.

“There are no penalties for innocent errors in your tax affairs,” HMRC Chief Executive Officer Jim Harra told Parliament’s Public Accounts Committee, speaking broadly on the subject on Jan. 26. according to HMRC guidelines.

Tory MPs have also described unacceptable reports that Zahawi threatened legal action against those seeking to disclose his dealings with the tax authorities. Dan Neidle, a blogger and former chief of taxes at Clifford Chance who made a number of revelations about the matter last year, told Bloomberg Radio earlier this week that he was the target of one such attempt.

“Instead of saying there might be a problem, he simultaneously made a series of denials and threatened to sue me and others who reported it,” Neidle said.

Zahawi, 55, was born in Baghdad to Kurdish parents and came to the UK as a boy after his family fled Saddam Hussein’s Iraqi regime in the 1970s. Zahawi did not speak English when he arrived and told how he was bullied at school.

He trained as a chemical engineer at University College London and then went on to work in the oil industry. Zahawi, a self-made millionaire through his YouGov role, entered Parliament in 2010, where he has represented Stratford-on-Avon ever since. He supported Brexit in 2016.

He rose to prominence for his role in overseeing the country’s successful vaccine roll-out during the Covid-19 pandemic under then Prime Minister Boris Johnson, and was widely regarded within the Conservative Party as a safe pair of hands with a record of shift. He briefly served as chancellor after Sunak resigned in July over Johnson’s breach of Covid restrictions in the so-called Partygate scandal. Sunak’s departure led to the collapse of the Johnson administration.

(Adds other layoffs in the sixth paragraph, background on Zahawi in the last two paragraphs.)

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