Is it just me or does this ‘financial hub’ idea of John Key’s sound a bit too much like a get rich quick scheme?
Apparently all we have to do is exempt foreign owners of foreign assets stored in NZ-based trusts from tax and the money will roll in. We’ll rustle up 5,000 fund managers from somewhere (maybe Key’s 4,000 cycleway builders can have a crack…) and the government will clip the ticket as the billions flow in and out of New Zealand. ‘Hey presto’ a billion dollar industry.
We’re not really producing anything, no real wealth, just taking a tiny slice of the flow overseas people’s investments in overseas assets. And because we’re taking a very small clip of the ticket, we need to have hundreds of billions of dollars in transactions going through these trusts. This all leaves us vulnerable.
It would be fine while things went well but we would be exposing ourselves to capital flows many times larger than our own economy. If something goes wrong, as Ireland and Iceland discovered, we would be in deep trouble.
At this point, I’ll turn over to Bernard Hickey:
“I’d much rather grow the productive sector and small businesses than focus on the money changers.
It also creates new distortions. Why should foreign fund managers receive tax breaks when other foreign companies don’t. Do we widen it to other ‘special’ foreign companies? How about pharmaceuticals? That’s what Ireland did. Or maybe investment banking? Or maybe we should try to set up some tax-free zone for foreign companies? Down that path Caymans Islands’ madness lies.
It’s all very nice to want to be the Geneva of the South Pacific, but what happens when the other tax gathering authorities such as America’s Inland Revenue Service (IRS) or the Australian Tax Office come calling to ask some tough questions. Switzerland’s notoriously secretive banks are currently under concerted attack from the IRS and others over this very issue.
John Key should stop looking for magic bullets and just do the hard work.”
Indeed. But when has this Prime Minister ever displayed the slightest interest in hard work?