Does #PanamaPapers matter to New Zealand?

Over at Public Address there is a post called Forgetting what we didn’t know which is about the New Zealand media / government response to the #PanamaPapers. In short various stories and government comments imply that the revelations have amounted to nothing.

Russell Brown writes

‘But the database already tells us some more subtle things. For instance, while it lists only 47 Mossack Fonseca-connected offshore entities in New Zealand, there are 547 in the Cook Islands, 9611 in Niue and 13,418 in Samoa. As Jason Brown points out in tonight’s Media Take, the structures of the South Pacific’s secret financial systems have generally been built by New Zealanders. We can tut about the Pacific, but it’s really us. Given the sanctions places like the Cooks place on local reporting, it’s actually incumbent on New Zealand journalists to look there too.
 
So, let’s see. And in the meantime, try not to forget what we didn’t know before.’

 
Analysis of the database will take time and given the NZ crew only just got full access – as per the attached image – a simple high level search on New Zealand shows links Offshore Entities (16) Officers (58) Intermediaries (5) Addresses (391). The real stories will be a bit more hidden than that and there are other searches to be made including the ones on other Pacific Islands as mentioned earlier (by others.) I think it is quite likely that other major stories will be uncovered once the NZ media team has had more time to follow the story lines and investigate the linkages between havens.

What I’m concerned about is the reputational damage to NZ business. When 300 economists can sign their names to say that essentially the secret trust business is one that should be controlled or shut down then NZ has to take notice.

Tax havens have no economic justification, say top economists

Regardless of what the NZ trusts actually do – they are seen to facilitate dodgy practices in other places. If NZ ever wants to collect tax from the bigger trans national companies who are “legitimately” not paying tax in NZ, UK, U.S or most places then we need to have a clean out.

If 35 or so other nations can commit to changing this then New Zealand should be part of that. Ironically Australia has tightened up the rules on transnationals and is doing the same on the #panamapapers.

Panama Papers: 35 countries agree on joint compliance action

Like or not these wider issues are connected and that could be part of the reason for some of the denial that is coming from National party hacks.

Overseas territories resist calls for concessions to end tax secrecy

Of course they will. The most simple fix that can be put in place fairly quickly is an inter country data sharing arrangement so lets join other governments and do that.

If New Zealand is as squeaky clean as National party politicians think then they should show a leadership position and put some controls in place. Make that trusts regime more transparent to other governments and stop facilitating questionable business.

So do the #PanamaPapers matter in New Zealand – absolutely they do. However I suspect that as it is a complex story those trying to get a 60 second sound bite will be out of luck. And what really matters is the wider context. If we want trans nationals to pay their fair share of tax in New Zealand we have to stop facilitating dodgy ethical behaviour such as that represented by the #PanamaPapers.

For more on how the trusts work and what can be done see Deborah Russell Foreign trusts 101: a plain English introduction amid the Panama Paper haze

“The result is that if they are set up right, then New Zealand’s foreign trusts can escape tax everywhere.”

 
Deborah goes on to write about a solution.

“There’s one exception to this general secrecy around foreign trusts. Inland Revenue collects information about whether there is an Australian resident settlor and who those settlors are, and it discloses this information to the Australian Taxation Office. That means that the ATO has enough information to pursue people who ought to be paying tax in Australia.
 
The Australian example provides the solution to the tax haven issue. Disclosure. We have no interest in taxing foreign trusts, but other countries do. However they can’t tax entities and assets they don’t know about. As a minimum, we should be doing exactly what we do for Australia: collecting names of settlors and beneficiaries, and proactively disclosing them to authorities elsewhere. That would shut our foreign trusts tax haven down immediately.”

 
Update: 13 May RNZ Panamania – do Kiwis care about the Papers?

“So all of the talk about New Zealand having a full disclosure regime, one of the government’s main defences of the foreign trust regime, is disingenuous.
 
There is, in principle, the ability to share information, but not if tax authorities do not know what to look for.
 
Another question posed is whether foreign trusts are disguising illegal behaviour.
 
We cannot say and that is the point.
 
The structure is designed in such a way that it is very difficult to ascertain whether the activities buried deep within these trusts and companies are lawful or not.”