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'He will not stand down': UK's Conservative chair holds firm over tax dispute

LONDON, Jan 23 (Reuters) - Britain's chairman of the governing Conservative Party, Nadhim Zahawi, will not stand down over a dispute about his tax affairs, allies of the former finance minister said on Monday, after opposition lawmakers again called for his resignation.

In the three months since Rishi Sunak was appointed prime minister, his government has been buffeted by questions over the probity of some of his lawmakers after he promised to lead the country with "integrity, professionalism and accountability".

"He will not be standing down," one ally said of Zahawi, after the Conservative chairman gave details of how he settled a dispute with Britain's tax authorities. They ruled that he had been "careless" with his declarations but had not, he said, deliberately made an error to pay less tax.

The opposition Labour Party said Sunak, who became Britain's third prime minister in as many months after his two predecessors were brought down first by scandal and then economic chaos, was too weak to sack Zahawi.

"His position is totally untenable, and it shouldn't be a case of we are sitting around waiting for him to resign, the prime minister should be sacking him," Lucy Powell, a senior Labour lawmaker, told BBC News.

"Every day that passes just shows the weakness of the prime minister that he's actually unable to sack Nadhim Zahawi."

The case relates to Zahawi's co-founding of opinion polling firm YouGov in 2000. He said he had asked his father to help finance and support the launch, in exchange for a stake.

He said when he was made finance minister last year by former prime minister Boris Johnson, questions were raised about his tax affairs, prompting him to raise them with government officials and the tax office which disagreed with the number of shares given to his father.

"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 said in a statement released on Saturday.

He also said the tax office found he had not set up offshore tax arrangements but the statement did not address whether he paid a penalty to the tax office.

A tax policy website - Tax Policy Associates - has estimated that Zahawi should have paid 3.7 million pounds ($4.59 million) based on the capital gains tax incurred by the sale of tranches of shares in YouGov worth more than 20 million pounds.

The Guardian newspaper has reported that tax authorities had imposed a 30% penalty on top of the owed tax.

According to the government's website, a penalty of 30% could be paid when there was "lack of reasonable care" or where the error is considered to be deliberate.

Former Conservative Party leader Iain Duncan Smith said on Sunday Zahawi should publish all information relating to the case and "get it all out now, whatever you have to do, and clear it up". ($1 = 0.8061 pounds) (Reporting by Elizabeth Piper and Kylie MacLellan, editing by Ed Osmond)