THE £90,000-a-month new boss appointed to save Northern Rock has non-domicile tax status, it was reported last night, as MPs prepared to push through emergency legislation to nationalise the bank.
Ron Sandler, who will earn 1.1 million a year as he fights to save taxpayers from having to bear the brunt of the Northern Rock collapse, may pay tax only on his UK income, not on his worldwide wealth.
Mr Sandler was brought up in Zimbabwe and has a German passport.
Although he has lived and worked in the UK for about 20 years, he is thought to have non-domicile status, sheltering his overseas income and assets from UK tax liability.
The revelation was seized on by opposition politicians, with Vince Cable, the Liberal Democrat treasury spokesman, accusing the government of finding a "search engine" that seemed to deliver "banana skins to fall on".
"Sir Ron Sandler is now presumably becoming the second best paid person in Newcastle after Michael Owen but at least Michael Owen pays his taxes here," Mr Cable told the Commons during a debate on Northern Rock.
"All the government's favourite businessmen, including Sir Richard Branson and now Ron Sandler, appear to have so little commitment to the country let alone the government that they are prepared to pay their taxes somewhere else."
Ann Godbehere, Mr Sandler's 75,000-a-month chief financial officer, is currently said to be resident for tax purposes in Switzerland, and is also likely to adopt non-dom status.
A spokesman for the Treasury said it would be illegal to disclose the tax status of individuals but he added: "If they were non-doms, we would be quite relaxed about that. We have got a tax regime which allows people not domiciled in the UK to come here and work.
"That is what has built London into a leading financial centre. Regardless of what people's position is, they pay tax on their income in the UK."
But the reports put pressure on ministers to make sure the bosses of Northern Rock became resident taxpayers.
Paul Kenny, general-secretary of the GMB union, said: "To end this severe embarrassment, the Chancellor has no alternative but to ask Mr Sandler to end his non-dom tax status and become a resident taxpayer, otherwise Mr Sandler's position becomes untenable."
Sir Howard Davies, a former deputy governor of the Bank of England and CBI chief, said the City had suffered "reputational damage" because of the Northern Rock debacle. He said uncertainty over the bank's future and the taxation of non-doms was a "nasty cocktail".
The tax status of the bank's new boss underscores the controversy surrounding non-doms.
Labour has been eager to shake off its old image of being unfriendly to business, but taunts from private-equity bosses that they pay less tax than their cleaners has put pressure on ministers to ensure the tax system is fairer.
In the autumn, when speculation was mounting that Gordon Brown would call a snap election, the Tories unveiled an eyecatching proposal for a 25,000 tax on the super-rich or non-domiciles who live in Britain but did not pay tax on their overseas earnings.
The plan was designed to take a fee from foreign tax-avoiders and use it to cut inheritance tax, also a Tory policy.
Six days later, Alistair Darling, the Chancellor, adopted the plan and announced he would place a 30,000 levy on non-doms who have lived in Britain for seven years. Last week, the Chancellor was accused of watering down his plans after Revenue and Customs issued a "clarifying note" to say that overseas income would not be taxed.
Mr Darling will still impose a 30,000 fee but the Treasury will not ask for full earnings details.
BROWN STAFFS BOARD WITH ALLIES
GORDON Brown has been accused of wanting to control Northern Rock, after it emerged that one of his favourite civil servants was now on the bank's board.
Tom Scholar, a former chief of staff at Number 10 who is now at the Treasury, was made a non-executive director of Northern Rock.
Philip Hammond, the shadow chief secretary to the Treasury, said: "This blows apart Gordon Brown's promise to run Northern Rock at arm's length. How can he claim that Northern Rock will be run free from political interference? "
Other non-executive directors include Philip Remnant, appointed by Alistair Darling, the Chancellor, to chair the Shareholder Executive, which manages relations between the government and major public-owned businesses.
Stephen Hester, the chief executive of British Land Company, whose subsidiary, British Land Property Advisers, donated 1,500 to the Scottish Labour Party last year, is also on the board.
The government has stressed it will not be involved in day to day decisions over the running of the bank.