John Shewan on Radio NZ

Radio NZ – John Campbell interviews John Shewan on 13 April 2014 after Andrew Little made accusations against Shewan in Parliament earlier in the afternoon.

John Campbell: Did you go with Don Brash to the Bahamas to advise on tax policy?

John Shewan: Yes I did, we were both requested to go up there to advise the Bahamas Government on their VAT.

John Campbell: Requested by who?

John Shewan:By John Key, by the New Zealand Government. The Bahamas Prime Minister had requested John key for some assistance because they were having difficulty in the Bahamas getting acceptance for the proposed VAT legislation and we were sent up there to have a look at why there was such resistance and to make recommendations for change.

John Campbell: OK, so VAT is exactly the same as our GST, well not exactly the same but more or less the same right?

John Shewan: It is exactly the same.

John Campbell: Ok. Did you recommend a zero rating for off shore financial services industry in the Bahamas?

John Shewan: No we did not. And it’s very disappointing to hear the statements made today because they’re completely and utterly inaccurate.

John Campbell: Sorry I’m just going to, because you, it’s absolutely been said in Parliament that you did. So without equivocation in a very singular way – did you recommend a zero rating?

John Shewan: No. And let me say that apparently what’s been said in Parliament today is based on a report from one of the Bahamas newspapers. I have in front of me the section of the report on financial services, and it’s very important just to cover the two points.

Firstly by the time Don Brash and I arrived in the Bahamas the draft legislation had been put before the Parliament and as is the case with most countries they had proposed to exempt financial services domestically and they financial services would be zero rated. That’s standard practice.

What we recommended was that the base be broadened so we recommended a number of other items be brought in.

In relation to financial services we recommended that they retain that exemption for domestic services, but they considered zero rating business to  business supplies just within the Bahamas as New Zealand had done a few years earlier.

John Campbell: So wait a sec, this is confusing now and it sounds like semantics to me, in other words is there zero rating for the offshore financial services industry in the Bahamas, and were you part of that? I guess that’s the nub of this.

Are you using semantics to get around the fact that somehow you were influential over that zero rating?

John Shewan: Absolutely not, as I just said by the time we got up there the draft legislation already had in it zero rating financial services, just as New Zealand does.

What we were looking at was in the context of the overall regime could they actually expand the base so for example…

John Campbell: So did they show you the draft legislation, did they say ‘what do you think of this’?

John Shewan: Yes they did.

John Campbell: Ok, and so did you sign off on the zero services, did you say ‘yeah that’s a good idea we stand by that’?

John Shewan: Well what we said was, what they were proposing in relation to financial services was entirely consistent with the rest of the world including New Zealand, and we recommended that they go have a look in due course and we said, and I’ll quote what we said here. I’ve got it in front of me.

“The Bahamas Government may wish to consider refinements to financial services provisions at some future point. The regime is complicated and based on the New Zealand experience it’s best added to an existing regime and it’s more practical experience. Attempting to implement this now would likely delay the implementation of VAT”.

So we did not recommend the zero rating for offshore financial services, that was already in the legislation and indeed it’s entirely consistent with rules in New Zealand, Australia and other countries.

So this is a complete red herring, a storm in a teacup, and very disappointing and I would have been more than happy to take a call  from Mr Little’s office to respond rather than people going off on the basis of what would seem to be a completely misleading newspaper article from the Bahamas.

John Campbell: Ok does this speak to a kind of broader sense coming from some quarters that you are a fox that’s been put in charge of the chicken house?

John Shewan: Ah well that may be the case, and I’ve been asked to do a job, I intend to do it, and I’d ask that the report be judged on the integrity of the report and it’s author, be judged on the basis of the report.

John Campbell: Which seems to be absolutely fair enough. And if you’re am empiricist, you say ok wait and let’s see what John Shewan comes out with.

But I guess what people are suggesting is gosh this is the man that quite likes zero ratings, this is the man that quite likes financial trusts.

And can I just ask you a couple of questions about this.

Have you ever placed foreign clients in New Zealand based trusts?

John Shewan: No I haven’t.

John Campbell: Never not once in the course of your career as a tax expert with PWC?

John Shewan: I’ve had no involvement whatsoever with foreign trusts. It’s not an area I ever worked in.

John Campbell: Have you ever put New Zealand clients in foreign trusts.

John Shewan: Ah no I haven’t.

John Campbell: Ok, have you ever put, have you ever been associated in any way with Monsack Fonteta?

John Shewan:No, never heard of them.

John Campbell: So you’d never heard of them prior to the release of the Panama papers?

John Shewan: No I hadn’t. I had no reason too John.

Can I come back to this allegation by Mr Little, because I really take it very seriously, because the assertion is that we made recommendations to protect the Bahamas state as a tax haven.

This is one hundred percent incorrect, totally wrong. And for such statements to be made without any consultation is to me quite alarming.

The Bahamas was and still is a low tax country, a tax haven, that’s correct.

Our role was actually to enable them to start raising taxes through the implementation of it’s VAT that worked . The regime was actually in not a good shape when Don Brash and I arrived and we made substantial recommendations to broaden the base.

Ironically what we did, and this makes what’s been said in Parliament today such a joke,  we materially increased the level of VAT that will be collected by the Bahamas government by broadening the base, and including key areas such as general insurance and…

John Campbell: Absolutely. But I guess and this is the point, and, but you didn’t include the offshore financial industry right?

John Shewan: No we did not.

John Campbell: Ok. One final question. Everyone’s talking about this Westpac case. Now I’d only read reports of it so today I got the judgment of Justice Harrison.

So this is Westpac versus Inland Revenue, you know the case, and if we turn in to point 564:

“Mr Shewan recommended that Westpac pay thirty to forty million annually even though that sum represented a rate of only 6.5% against the reported profit.”

So that’s in Justice Harrison’s judgment from the high court. Is that true?

John Shewan: Ah well it’s been taken out of context but it was part of an overall letter which I’m limited in terms of what I can say about that, but actually what it was saying is, and most tax advisers at the time were saying the same thing, is that there were likely to be changes made to the banking and tax rules to tighten the tax base, and that was in fact done. And then these cases came before the courts after that, but the rules had actually already been tightened so they were historical.

And actually that advice was actually in line, in terms of saying the banks should be paying tax.

John Campbell: And by golly they had to, right. I mean there was a huge award made against them.

John Shewan: The entire banking industry was included in that…

John Campbell: Absolutely…

John Shewan: …and it would have been fifty to eighty tax advisers involved, and all I can say is in the context of 38 years working in the tax area there are cases that you will win, there are cases you will lose.

I’m entirely satisfied with my record and I’m entirely satisfied that I have consistently acted with integrity. I accept that some Members of Parliament have had more litigation experience than me and they may have a better track record and good luck to them on that.

But I absolutely reject any suggestion that I’ve acted in anything other than a totally professional way, and I do object to some of the very misleading so-called facts which are complete myths that are now being perpetrated in Parliament.

Radio NZ Report: Trust reviewer rejects Labour’s Bahamas accusation

Audio: “Completely and utterly inaccurate” – Listen to John Shewan’s live interview on Checkpoint with John Campbell

Andrew Little’s comments in Parliament: Little slams Shewan who slams Little

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12 Comments

  1. Missy

     /  14th April 2016

    Those questions from John Campbell shows his complete ignorance and lack of knowledge about GST.

    First, he didn’t even realise that GST is a Value Added Tax (i.e.: VAT), secondly as Shewan says financial transactions are generally zero rated on these types of taxes – and have been since GST was first introduced in NZ. In fact IIRC there has been no substantial change to what is liable for GST in NZ since it was introduced. Any country with this type of tax would be well served to look at NZ’s regime, it is simple and has a high compliance with relatively low compliance costs.

    What I would ask John Campbell, is if he is so worried about financial transactions being zero rated would he be willing to pay GST on his mortgage? foreign currency exchange for any overseas holidays? His Credit Card interest? Bank transfers? Internet Banking Transactions? All are financial transactions.

    Reply
    • Joe Bloggs

       /  14th April 2016

      I question your judgement of John Campbell. My reading of his questions is that he is contextualising the interview in a way that listeners who know very little about GST or VAT come to a better understanding of the tax as the interview progresses. In other words he doesn’t assume that every listener is as knowledgable about tax matters as you are.

      Reply
      • Missy

         /  14th April 2016

        Your opinion is that I lack judgement on John Campbell, my opinion is that he doesn’t have a full understanding of GST and VAT, or even that they are the same tax.

        Without hearing the interview I am going on what is written and when he said:

        “OK, so VAT is exactly the same as our GST, well not exactly the same but more or less the same right?” He showed he didn’t really know what he was talking about. Your view that he was contextualising the interview in a way that listeners who know very little about GST or VAT come to a better understanding doesn’t hold water. In order to contextualise the interview to give those with little understanding of the tax a better understanding he should have stopped after he had said ‘…so VAT is exactly the same as our GST…’, that gives the information required. Most people have enough of a basic understanding of GST and understand that it is the same as VAT.

        Reply
        • Brown

           /  14th April 2016

          ”… John Campbell … know very little …”

          Thanks Joe, that sums it up. A sanctimonious, socialist, rich, self centered, short little prick who battles for the poor while refusing to work for less that hundreds of thousands. Even Clark hated him.

          Reply
          • Gezza

             /  14th April 2016

            PDB posted something yesterday that explained this:
            https://yournz.org/2016/04/13/little-slams-shewan-who-slams-little/#comment-95274

            Reply
          • duperez

             /  14th April 2016

            Do you object to a “sanctimonious, socialist, rich, self centered, short little pricks” asking questions and getting to the truth?
            Which ‘journalist’ who is not a sanctimonious, socialist, rich, self centered, short little prick should have done the interview?
            Excepting the ‘socialist’ bit should David Farrar have done it or would being a sanctimonious, rich, self centered, short little prick have precluded him?

            Reply
            • Brown

               /  16th April 2016

              But he doesn’t get to the truth – that’s the problem with pretend lefties like him. They pretend to get to something that looks like the truth.

    • Alloytoo

       /  14th April 2016

      I agree with Missy. Campbell demonstrated a frightening ignorance on the basic principles of GST

      Reply
      • Kitty Catkin

         /  14th April 2016

        I would hope that most people would know about GST and VAT; they’ve been around long enough.He could have just said something like ‘VAT, of course, is like our GST.’ and left it at that. I don’t need to know all the ins and outs of them to know what they do, and I probably couldn’t explain these-but if I was going to do this interview, I’d make sure that I did so that I wouldn’t sound like a fool. How long would it take to read about them so that one knew how they worked ?

        Reply
  2. Alan Wilkinson

     /  14th April 2016

    Most journalists are innumerate let alone competent to discuss economics. I bet you could count the number with any tertiary qualifications in maths on the fingers of one hand.

    Reply

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