Sunak fires Zahawi for ‘serious’ violation of tax ethics

(Bloomberg) – Prime Minister Rishi Sunak has sacked Nadhim Zahawi, citing “serious” breaches of ethics rules after revelations about the Conservative Party chairman’s tax dealings rendered his position untenable.

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In a letter to Zahawi on Sunday, Sunak said the independent review of the case was complete and “it is clear that there has been a serious violation of the Ministerial Code. Accordingly, I have informed you of my decision to withdraw from your post.

Zahawi had admitted he had been “negligent” with his taxes and had settled a retroactive multi-million pound bill with the country’s tax collector. That – and the revelation that he had also incurred a tax penalty for not paying the right amount at the right time led to mounting pressure from his own party for him to resign or for Sunak to fire him.

The long-running controversy had threatened to derail Sunak’s administration, diverting attention from his stated priority of reviving Britain’s moribund economy as well as his attempt to reverse the Tory’s plummeting outlook two years before a general election.

The situation has allowed Labor leader Keir Starmer, whose party currently holds a large lead over the Tories, to accuse Sunak of being ‘hopelessly weak’ and link the party chairman’s tax affairs to the Sunak’s wife, Akshata Murty, who had enjoyed it so much. called non-dom tax status in the UK.

Zahawi is the second cabinet minister to quit Sunak’s three-month-old government over ethics failings, allowing Labor to revive ‘Tory Sleaze’ allegations. Gavin Williamson resigned as minister without portfolio in October after allegations he bullied staff. Deputy Prime Minister Dominic Raab is under ethics investigation after multiple complaints of bullying.

After initially backing Zahawi, Sunak commissioned the ethics inquiry, saying his colleague’s Jan. 14 statement about his tax payments changed the calculus. On Wednesday, he told the Commons it was fair to let ‘due process’ take its course and await the outcome of the inquiry, also suggesting the easiest option would have been to fire him immediately. Stephen Massey, chief executive of the Conservative Party, will take care of party affairs on an interim basis until a successor to Zahawi is appointed.

Zahawi himself had spent several days telling his colleagues he had done nothing wrong, according to Tory MP Bim Afolami. But the anger of conservative lawmakers was growing. In a letter posted to Twitter on Sunday, Zahawi did not acknowledge the tax problem and pledged to continue supporting Sunak from the backseats.

A cabinet minister and several Tory MPs have privately said Zahawi should step down. A Times article on Thursday suggested Sunak was “livid” with Zahawi, a claim denied by the Prime Minister’s Office.

Read more Sunak takes UK cabinet on retreat with Tories Gunning for Zahawi

Zahawi said in his January 14 statement that Her Majesty’s Revenue and Customs concluded he had been “reckless and not deliberate” in his tax dealings. His tax bill, which related to the sale of shares in the YouGov polling firm he co-founded, was £4.8million ($5.9million), including a 30% penalty, according to a person familiar with the matter. The settlement took place while Zahawi was Chancellor of the Exchequer in mid-2022.

‘There are no penalties for innocent mistakes in your tax affairs,’ HMRC chief executive Jim Harra told Parliament’s Public Accounts Committee, speaking broadly on the matter on 26 January. Negligence can be compared to the long-standing concept of general negligence law, according to HMRC guidelines.

Tory MPs also dismissed as unacceptable reports that Zahawi had threatened legal action against those who sought to publicize his dealings with the tax authority. Dan Neidle, a blogger and former tax chief at Clifford Chance who made a number of disclosures about it last year, told Bloomberg Radio earlier this week that he had been the target of such an attempt. .

“Instead of saying there might be a problem, he simultaneously issued a series of denials, threatening to sue me and others reporting 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. Unable to speak English when he arrived, Zahawi was told how he had been bullied at school.

He trained as a chemical engineer at University College London and later worked in the oil industry. A self-made millionaire thanks to his role at YouGov, Zahawi entered Parliament in 2010, where he represents from Stratford-on-Avon. He supported Brexit in 2016.

He rose to prominence for his role in overseeing the successful deployment of the vaccine in the country during the Covid-19 pandemic under then-Prime Minister Boris Johnson, and was widely seen within the Conservative Party as a pair of sure hands with a delivery record. He briefly served as chancellor after Sunak quit in July due to Johnson breaching Covid restrictions in the so-called Partygate scandal. Sunak’s departure led to the collapse of the Johnson government.

(Adds further resignations to sixth paragraph, information about Zahawi to last two paragraphs.)

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