Written By: - Date published: 7:33 am, May 9th, 2016 - 277 comments
Categories: brand key, Economy, greens, james shaw, john key, Politics - Tags: Bentleys, ITJN, Mossack Fonseca, nicky hager, RNZ, tax havens, tvnz
A new release of Panama law firm Mossack Fonseca papers absolutely confirms New Zealand is a tax haven, said investigative writer Nicky Hager, who along with TVNZ and Radio New Zealand, has been given access to the huge wad of files.
And ironically, it is because of New Zealand’s squeaky clean reputation that tens of thousands of foreigners, predominantly from south and central America, have come flooding here.
When news of the 11.5 million files Mossack Fonseca files leaked by whisteblower “John Doe” was first published last month, prime minister, John Key, categorically denied New Zealand is a tax haven and said full disclosure was needed.
New Zealand has set up a regime whereby foreign entities or people registered here but earning money offshore are zero rated for tax.
Key has since back-pedalled and accepted it might be and has appointed tax expert and well known advocate of low tax regimes, John Shewan, to review the foreign tax lax.
TVNZ’s investigation today, with cooperation from the International Consortium of Investigative Journalists (ICIJ) reveal how New Zealand, Niue, the Cook Islands and Samoa have become prime destinations for the rich around the globe to hide their financial secrets and avoid tax.
“What the Panama Papers show, without any doubt at all, absolutely conclusively, is that New Zealand is functioning as a tax haven,” Hager told TVNZ’s Breakfast program.
TVNZ reveals the New Zealand operation centres on an accountancy firm called Bentleys, run by Roger Thompson, a former Inland Revenue executive.
Bentleys, in downtown Auckland, is the New Zealand agent for Mossack Fonseca.
Bentleys charges NZ$4000 to set up trusts for wealthy foreigners who then use New Zealand’s limited disclosure rules to stay anonymous even to IRD. Bentleys charges another $2000 a year to send a one page form to IRD to confirm the trust clients don’t need to pay any tax under New Zealand law.
Checks on clients are limited to a 15-page questionnaire, a scanned passport and an internet search. The requirement to have a New Zealand director in the trust is skirted by naming a Mossack nominee who isn’t a benefactor.
“IRD never knows who the real people are behind these trusts,” Hager says. “They never get to see their accounts, they never get to see what business they are doing.”
“It is a completely unworkable system if you want to avoid corruption, crime and large scale tax dodging.”
Bentleys deliberately avoids linking the trusts with mostly First World countries that have double tax agreements with NZ.
“It looks likes one, it smells like one, and it’s been used as one, then to all intents and purposes it is a tax haven,” Green Party Co-leader James Shaw said.
TVNZ said its investigation link NZ-based trusts to multitudes of secret central and south American deals involving middle men. Israeli Assaf Zansuri is a Bentleys client who brokered a deal to sell drugs to Mexico to spy on drug cartels.
It also uncovered a deal by Venuzuelan banker Carlos Durado buying Mexico’s second largest drug company using a New Zealand trust and a Dutch company.
Roger Thompson said he breaks no laws and his services are used legitimately and checks on his clients are of a “high standard”.
He also denies New Zealand is a tax haven. He said New Zealand is a high quality jurisdiction for trusts with a “benign” tax system in certain circumstances.
Hager said it was not about tweaking the legislation, “which is probably what the government’s very tame review will recommend,” it’s about whether we want to be a tax haven.
Ironically, the Mossack Fonseca files reveal the firm was actively promoting New Zealand’s good reputation to its wealthy foreign clients as a good place to do business. It set up here three years ago. Previously it has had a base in the tiny state of Niue, a New Zealand dependency where a similar regime operated.
The great thing about New Zealand, Mossack says in its promotional material, is that it is known for its transparency and fiscal compliance. It is member of the UN, the OECD, IMF and belongs to the British Commonwealth. It has secure and flexible trust laws that make it easy for clients to comply by paying low levels of tax.
There are 61,000 documents relating to New Zealand. Mossack pushed Look Through Companies (LTCs) which meant foreigners are required to pay no tax here as long as the money is earned offshore.
A decade ago there were less than 2,000 foreign trusts here. When Mossack opened here is 2013, that swelled to over 7,500 and that has since grown to nearly 11,000.
TVNZ said a new report from the International Tax Justice Network suggest that the equivalent of NZ$18 trillion, yes that’s trillion, has been siphoned out or Russia, Nigeria,China and other developing economies into offshore finance schemes like New Zealand’s.
John Key pulled out of his regular Radio NZ Monday morning interview on hearing that RNZ is part of the investigation of the Panama papers.
(Simon Louisson formerly worked for The Wall Street Journal, NZPA, Reuters, The Jerusalem Post and was most recently a political and media adviser to the Green Party)
RNZ: New Zealand’s part in the Panama Papers
John Key with Paul Henry Newshub: Panama Papers: NZ ‘absolutely conclusively’ a tax haven – Hager