The tax collectors go after you and me, and paperboys, and weekend cashies. They aren’t nearly as interested in the $2bn cost of illegal tax avoidance (part of the total up to $9.4bn of “economic crime”). And they certainly aren’t interested in the offshore accounts hosted in NZ as a tax haven:
What are the Panama Papers? A guide to the biggest data leak in history
The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC.
What do they reveal?
The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens. …
See also this summary, and live coverage of the world reaction. As we now know, NZ features in this story:
The Panama papers: NZ – the quiet tax haven achiever
…
Both countries [Malta and NZ] are quiet achievers in the ranks of global tax havens, and both are determined to keep it that way.While Malta has been fiercely resisting pressure to close tax avoidance loopholes used by foreign companies, including Australian firms, to move profits out of the European Union, New Zealand has fought just as hard to protect its laws that make foreign profits tax-free and invisible for beneficiaries of its offshore trusts.
But what Key didn’t know, as he and Australia’s Prime Minister Malcolm Turnbull mingled with Muscat at CHOGM, was how deep those links really ran. …
While there are some legitimate uses, tax havens can be used as part of the tax avoidance that denies governments income (and therefore denies we the people of services and support). At their worst they can be used to hide dirty money. Despite the fact that the Panama Papers clearly identify us as a tax haven, Key is trying to deny it:
Prime Minister John Key has mounted a defence of New Zealand’s tax system, rejecting any suggestion it acts as an international tax haven.
…
“Tax havens are where there is non-disclosure of information – New Zealand has full disclosure of information, and so all you’ve got is New Zealand’s taken a different view from a lot of different jurisdictions and that’s because the way we tax is we tax a settler.
See the guest post from Deborah Russell on the loophole in this “full disclosure” claim.
“In other words, it’s all about making sure New Zealanders pay their fair share of tax, what we’ve got is quite a legitimate regime.”
No that’s what you want it to be about. It’s about NZ being used to dodge tax obligations or park dirty money. It’s about our international reputation.
“New Zealand has had the same tax laws when it comes to trusts since 1988;
Which is meaningless if the laws aren’t doing their job. (Update: see comment below on a law change in 2011.)
New Zealand also had a review undertaken by the OECD in 2013 and they gave New Zealand a ‘clean bill of health’.
Looks like the OECD wasn’t in full possession of the facts. (Update: As it turns out in fact, this was just a lie.)
“We also have an extensive disclosure regime, we’re a signatory to a network of different treaties and we’ve been strengthening those laws over time.
See above on disclosure and ineffective laws. In short, Key’s denials don’t hold up. This particularly so in the light of at least two three prior warnings that his government received.
The first warning (update) was back in 2010 from the Law Society, as discussed here.
The second warning was in 2012 in the form of a 60 Minutes item and a followup piece by Chris Barton in The Herald:
Craig Elliffe, professor of Taxation Law and Policy at Auckland University Business School, says this country’s foreign trust structure effectively provides a vehicle for foreigners not to pay tax and therefore, in a broad sense, we are a tax haven.
See also the interesting range of marketing material advertising our “clean” haven status:
The tax haven that isn’t called a tax haven. A rose by any other name.
The third warning in 2013 came from none other than the IRD, as summarised yesterday by Vernon Small:
However, in a 2013 report IRD warned that “our foreign trust rules continue to attract criticism, including claims that New Zealand is now a tax haven in respect of trusts”.
IRD said this was largely because “the mismatch between our rules and those of other countries may result in income not being taxed either in New Zealand or offshore”. “To protect our international reputation, it may be necessary to strengthen our regulatory framework for disclosure and record-keeping.” “This, in turn, raises the question of whether our foreign trust rules are sustainable.”
So it’s been clear for a while that NZ is operating as a tax haven. Key, Dunne, Woodhouse and others have tried to deny it. Now with the release of the Panama Papers it is impossible to deny, and hopefully (see Small’s Calls mount for tighter rules on foreign trusts as Key denies NZ a ‘tax haven’) it will be impossible to ignore.
Via Tautoko Mangō Mata on Open mike yesterday:
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