John Key’s evasions on our country’s role as an international tax haven have been truly shameful, his usual mixture of outright lies, half-truths and evasions. Yesterday Vernon Small took him apart in this strongly worded piece:
Panama Papers: New Zealand’s trusted reputation demands changes to foreign trust rules
And to claim that the required level of record keeping is “full disclosure”, as Prime Minister John Key did this week, is a bleak joke. To claim it negates accusations NZ is a tax haven – because we do not have such levels of secrecy – is equally laughable. If it doesn’t make New Zealand a “tax haven” – and it sure looks like one – it at the very least makes it “a haven” from scrutiny. Just look at the advertisements spruiking New Zealand’s advantages to foreign trusts.
However you look at it, Key made a significant political blunder this week by instinctively defending the tax and trust regime (and by extension those who might exploit it) in the face of domestic and worldwide suspicion. Don’t ask me, ask the supporters of Donald Trump and Bernie Sanders.
To make matters worse he cited the benefit to New Zealand – some $24 million in fees harvested by lawyers and accountants setting up and managing the funds. What price New Zealand’s reputation – something IRD and other officials had already warned about? And is it morally defensible to effectively say any loss of revenue from trusts here is some other country’s issue and we are focused on defending our own tax base? An “each country for itself” approach hardly sits well with international steps, which New Zealand has enthusiastically joined, to deal with corporate profit shifting and base erosion.
Yes, the Nats simply deny that we have a responsibility to do anything about tax havens. English says “the Mexican tax base is interesting, but its not our main priority”. Key literally shrugs the issue off. Here’s one of the excuses we have used for doing nothing:
[Key] said in 2013, after warnings from the IRD about possible damage to New Zealand’s reputation from its foreign trust law – that could see income “not being taxed either in New Zealand or offshore”- the new Revenue Minister Todd McClay had sought advice. “The advice they got was that it would require a lot of work from IRD officials, because this stuff is so complicated, and the argument was ‘was it worth it in terms of all the other issues on the IRD work programme?’ “
… Simon Power acknowledged New Zealand’s reputation as a good place to do business had been harmed by overseas individuals using New Zealand registered companies “to commit or facilitate crime such as money laundering, tax evasion and fraud, in overseas jurisdictions”. Mr Power also said a lack of enforcement of current company law meant New Zealand authorities had been unable to help international agencies in trying to combat international fraud. He said the misuse of company structures by “a small number” of overseas individuals and New Zealand-based agents “threatens our international reputation as a good place to do business”.
Even more unfortunately for John, a much better man than he is prepared to take show some actual moral leadership on this issue. President Obama yesterday:
Obama calls for international tax reform amid Panama Papers revelations
Barack Obama has called for international tax reform in the wake of the revelations contained in the Panama Papers.
In an unscheduled appearance in the White House briefing room, Obama described the revelations from the leaks as “important stuff” and said the issue of global tax avoidance was a “huge problem”.
“We shouldn’t make it legal to engage in transactions just to avoid taxes,” he added, praising instead “the basic principle of making sure everyone pays their fair share”.
Do you hear that John? That’s the American President, your old golf buddy, calling for your action. When The Greens called for action you called them “barking mad” (another of your petty and offensive insults). But now it’s Obama – is he mad too?
What are you going to do now John?
According to the IRD:
Whether the rules surrounding foreign trusts should be changed was a “political question” and not up to Inland Revenue, Littlewood said. “It would be technically very easy for the Government to close this down.”
So it only requires the political will.
Far too much to read on this fast developing story:
Gordon Campbell on living in denial about the Panama Papers. “So now we know why New Zealand won all those awards for being the ‘easiest place to do business.’ Evidently, foreign firms that register in New Zealand can operate with impunity when it comes to complying with (a) our money-laundering and terrorism financing laws and (b) our international obligations on such activities.”
Toby & Toby on … the Panama Papers, NZ and ‘tax haven’ ridiculousness. Contains a list of quotes from various sources over the years describing us as a tax haven.
Liam Dann: Government has big questions to answer. “Perhaps, most worryingly, it is because we don’t require any detailed disclosure about those trusts and don’t have any capacity to share information with regulators in countries that might be seeking to chase trustees for tax.”
Panama Papers: Key defends offshore banking comments. “When the Panama Papers made global headlines on Monday, Mr Key was forced to defend his vision to model New Zealand on a country known for its secretive financial system and tax haven activity.”
NZ trusts prone to abuse – tax expert. “Overseas trusts such as those operating in New Zealand are by their nature prone to abuse and are a common method for tax evasion, an international tax expert says.”
David Cameron left dangerously exposed by Panama Papers fallout. 4 different stories in 2 days from Cameron, who is suddenly a big fan of privacy when it comes to his family finances.