Across the Ditch – Australian radio FiveAA.com.au‘s Peter Godfrey and EveningReport.nz‘s Selwyn Manning deliver their weekly bulletin, Across the Ditch. This week: The Prime Minister John Key was chucked out of Parliament yesterday (Wednesday) after a series of questions probing into what his government is going to do about New Zealand’s foreign trust/tax haven debacle.
New Zealand was named in the Panama Papers leak as a tax haven alongside 20 other countries, including the Cook Islands, Niue, Samoa, Singapore and Hong Kong.
This week, a joint investigation between Television New Zealand, Radio New Zealand and internationally regarded investigative journalist Nicky Hager revealed New Zealand was referenced more than 61,000 times in the latest release of documents – information leaked from the Panamanian company Mossack Fonseca.
Mossack Fonseca specialises in foreign trusts and taxation services. In the last two years, the company has actively promoted New Zealand to its clients, particularly those from Latin America, as a place to park their money.
Since then, there has been a spike in money flowing into foreign trusts and look through companies set up in New Zealand.
When John Key became Prime Minister back in 2008, and on numerous occasions since, he openly spoke about a desire to see New Zealand become the Switzerland of the South Pacific, the Singapore of Australasia – in essence, a place where foreign currencies, wealth, goods, services, transactions, could be traded or transacted freely, with first-world security, and when it came to foreign trusts… with a minimum of public disclosure… and a high degree of confidentiality.
PUBLIC OPINION:Since the Panama Papers were released, John Key has found himself on the wrong side of public opinion.
Two weeks ago, a UMR poll found 57% of those polled were concerned NZ foreign trusts were being used by people overseas for tax evasion purposes. (ref. Scoop.co.nz)
Only 21% thought John Key’s Government was handling the tax haven problem well.
52% believed a full independent enquiry was needed.
Women in particular are upset, with 63% of those polled being concerned about New Zealand being used as a tax haven.
Since the poll, the news has been all bad for John Key as, initially, he attempted to play down the problem.
Last week, Kiwis found out that when Inland Revenue sought to review the laws surrounding foreign trusts in New Zealand, it quickly became a sensitive political issue. John Key’s personal lawyer, who operates a trust for the Prime Minister, quizzed John Key about whether the Government was going to crack down on the secretive industry.
John Key said he didn’t think so, and told him to ‘go talk to Todd McLay’ (the then revenue minister). Then, the Prime Minister’s lawyer and a host of other accountants and lawyers who specialise in foreign trusts got a meeting the very next day and in an email the lawyer told McLay that the Prime Minister John Key had told him he didn’t want changes made to foreign trusts compliances.
A short time after the meeting, the Revenue Minister told Inland Revenue not to pursue a review of foreign trusts.
Then in April, while under pressure to act, the Prime Minister agreed to a review of how Inland Revenue Department handles foreign trusts, and whether New Zealand complies with the OECD guidelines on foreign trusts.
However, the Prime Minister has refused to initiate an independent inquiry into the matter, something that would essentially reveal whether the perception is justified… that New Zealand has become a tax haven.
HOW IT WORKS:
According to information sourced from the Panama Papers, the word around Mexico, Columbia and latin America in general, is that New Zealand is seen as a ‘respectable’ jurisdiction, a perfect place to park your wealth, hide it from the wife or your colleagues. New Zealand has become a prized place that ultimately provides enough secrecy as to be an attractive jurisdiction where money obtained from dodgy and/or criminal deals can be laundered.
And if you are looking to avoid paying your proper share of tax, then New Zealand’s trust set up is literally gold.
Since John Key’s National-led Government was elected in 2008, it has brought in a law where foreign trusts in New Zealand are taxed at zero percent, as long as the money held within the trust was not earned in New Zealand.
Once here, the wealth can then be declared to the country of origin that the money has been taxed in New Zealand. The administrators then get a tax waiver from the country of origin, and the money can then be cabled back home.
This zero-tax loophole permits the owner of the wealth to avoid paying any tax.
Additional to this zero tax loophole, unless the entities or principles whose wealth is held within a New Zealand foreign trust live in Australia or New Zealand, a high degree of secrecy can be applied, in essence people and entities of good or dodgy character, can stash their loot in a secret, safe, and fairly respectable place right here in New Zealand… And, the question is, does the Prime Minister think that is ok?
WHERE TO FROM HERE:
By the weekend, the Prime Minister began to insist, that no New Zealander has avoided paying tax. But that comment diverts attention away from the real problem, that the system John Key’s Government has in part created:
* allows people and companies from other countries to avoid paying millions, potentially billions, of dollars in tax
* and due to the degree of secrecy that the law provides to foreign trusts, John Key’s Government has built a system that is attractive to those who have accrued wealth through corrupt practice, drug dealing, arms trading, and possibly terrorist activity (revelations justifying this comment are now emerging through questions under privilege in Parliament).
And all this brings me back to the opening line in this bulletin. This week (Wednesday) the Prime Minister was chucked out of Parliament by the Speaker after he continued to shout down the opposition, continued over the top of the Speaker as he stood there attempting to bring the Prime Minister’s exchange and Parliament back into order. The Finance Minister Bill English was left to limp on answering on the Prime Minister’s behalf.
What’s clear this week is, Kiwis do not like their country being used as a ticket clicker for dodgy deals and tax avoiders. And, for some, the Prime Minister is seen as part of the problem rather than the initiator of a solution.