- Date published:
7:02 am, May 2nd, 2016 - 36 comments
Categories: Abuse of power, accountability, class war, International, john key, national, peter dunne, tax - Tags: corruption, IRD, ken whitney, panama papers, patsy questions, Peter Dunne, tax haven
The tax haven concerns keep coming. An anonymous editorial in the Dom Post:
Taxing questions to answer
Prime Minister John Key’s lawyer, Ken Whitney, runs a company inviting foreigners to put their money in a New Zealand trust. The idea is that it won’t be taxed here, or probably anywhere.
When Inland Revenue outlined concerns with the rise of such trusts, and suggested a review in December 2014, Whitney wrote to their minister. “I have spoken to the Prime Minister about this and he advised that the Government has no plans to change the status of the foreign trust regime.” His request for a meeting was swiftly granted. By May last year, the review had been ditched. No changes were made to the foreign trust rules.
This episode is worrying. Whitney explicitly invoked the prime minister’s support to try to head off a review that might have killed his business. But his industry sorely needed a review – and more.
In exchange for being a borderline tax haven, what does New Zealand get? IRD’s guess is $24m a year in fees charged by Whitney’s firm and others – and $3m in tax on that.
That is a bad deal: New Zealand trashes its reputation, and contributes to an international pandemic of tax avoidance by the mega-wealthy, and in return receives a pittance in lawyers’ fees.
Whitney’s email adds to the murk. It leaves the distinct impression that Key was swayed by a close associate with plenty to lose into dumping an important review.
As ever with Key, controversy descends and so does a kind of fog. It was an informal gathering. Opponents are making “desperate claims” and can be waved off, he says. But he must be clearer. Did he assure Whitney that the foreign trust regime would not be touched, and if so, why? Is he troubled by his lawyer’s use of his name to stifle a review? And why is he still not acting with urgency to stamp out any suggestion New Zealand has become a hiding hole for wealthy tax evaders?
Why not indeed? Matt Nippert:
World famous, but secret in NZ
While that email has sparked political debate over the relationship between Key, Whitney and Inland Revenue’s policy-formation, other material in the OIA release provides a bounty of information on the scale, motivations and self-impressions of an industry that has largely operated under the radar.
New Zealand was said to be competing for this business with similar zero-tax structures in Singapore, Israel, Hong Kong, Malta, the Netherlands and the United Kingdom and United States. But the industry expressed concerns that even a proposal to tinker with tax rules for the sector could gut the industry as clients lose faith and take flight. “This would likely undermine the trust and confidence built up over many years, whereby high wealth families have come to trust New Zealand as a safe country,” the note said of making a proposal public.
No one comes out of this looking good. Andrew Geddis:
According to RNZ news:
The day after Mr Whitney’s email to Mr McClay, the minister’s office contacted Inland Revenue to say the minister had “expressed some concern that one of the options that will be presented in the report to him before the end of the year would be a removal of the foreign trust regime”.
Inland Revenue senior official Carmel Peters responded saying they would “bear this in mind in how we write the report”.
This strikes me as pretty poor on the part of both the Minister’s office and IRD officials. Sure, Ministers in the end get to set Government policy and make decisions about what advice to accept or reject. But this looks like the Minister was telling his officials “I don’t even want to hear about why NZ might want to end this policy, irrespective of the reasons to support it”. And having been told this, the officials simply accepted that the territory was verboten.
Whatever happened to a neutral public service that is tasked with providing “free and frank advice” to Ministers? Maybe Dr Chris Eichbaum has something of a point when he suggested recently that “public servants might just provide ministers with the advice they wanted to hear, rather than what they needed to hear.”
We the people are concerned:
More than half of New Zealanders are worried about the country being a tax haven after the Panama Papers leak, according to a new poll.
Peter Dunne – tax haven label ‘extremely damaging’
Former Revenue Minister Peter Dunne told TV One’s Q+A programme, ‘if the label ‘tax haven’ is being bandied about now as it is, sticks, then that’s extremely damaging. You think of the way we perceive other countries that we’ve historically labelled as tax havens. We don’t view them credibly, and I think that’s the big risk to New Zealand.
Mr Dunne told the programme, ‘ we’ve got to get to the bottom of is the extent of the activity, what the profile of people using these trusts is, what the implications are for our reputation, and how we work in concert with other countries to make sure, as I say, a robust international system can be developed to combat them.’ …
There’s only one way to get rid of the tax haven label. Stop being a tax haven. Key will be hoping to wait it all out as usual. I hope that our media is up to keeping the spotlight on these issues.