Facts arising out of the Panama Papers

Christ Trotter summarised the Panama Papers:

  • New Zealand is not a tax haven in the generally accepted definition of that term.
  • Changes to New Zealand legislation have put this country at risk of being perceived as a tax haven.
  • The Panamanian law firm, Mossack Fonseca, took advantage of our legislative laxity to promote New Zealand as a politically stable and corruption-free hiding place for their clients’ assets.
  • The National-led Government’s responses to IRD warnings that New Zealand was at risk of losing its corruption-free reputation were wholly inadequate.
  • The entire problem can be solved easily: simply by toughening-up the disclosure provisions of the relevant legislation.

Trotter also summarised Labour’s handling of the issue:

If Labour had been willing to assess these facts dispassionately, and with an eye to presenting itself as a credible alternative government, its handling of the Panama Papers would have been very different.

From the outset, it would have made it very clear that its number one priority was to protect New Zealand’s international reputation. That being the case, it would have been very careful to avoid calling their country a tax haven.

Their treatment of the Prime Minister would also have been different. Rather than attempting to associate him with the dubious behaviour of Mossack Fonseca, they would have acknowledged that the offending legislation had evolved gradually, under both Labour and National, and offered to make its remediation a bi-partisan effort.

Having sought out and obtained the best advice available from tax lawyers and accountants about how the legislation might best be rewritten to eliminate its usefulness to entities like Mossack Fonseca, Labour would then have approached the Government with an offer to rush through the necessary changes under urgency.

It’s hard to argue with this.

From Labour fails to make gains from Panama Papers

Who cares about papers from Panama?

The big Panama Papers revelations promised for this week seem to have fizzled out quickly.

Does anyone part from a few journalists and opposition MPs and a political activist care much about them?

Jane Paterson asks at RNZ: Panamania – do Kiwis care about the Papers?

The Panama Papers story is a hard one to tell, but underneath the tales of Brazilian online gambling tycoons, world leaders and Venezuelan bankers are important issues that need to be addressed.

But are they being addressed adequately? Sensible? Non-sensationally?

One problem now is that if something genuinely damning emerges all the wolf wailing may dampen the public response.

One of the questions repeatedly asked is why should New Zealanders care about this story, prompted by a massive leak of documents from the Panamanian law firm Mossack Fonseca.

That largely remains unanswered.

New Zealand warranted some mention, but the real focus on this country has only been since a team of journalists from RNZ and TVNZ, and the investigative journalist Nicky Hager, was given access to the Papers about a fortnight ago.

No, RNZ and TVNZ tried to give it real focus and most people’s vision went fuzzier.

If you can be bothered read through Paterson’s insistence there are important and worrying aspects in there somewhere.

I skimmed to the bottom.

The government has ended the week relatively unscathed as a result of the Panama Papers but the story was never intended to target the government and specific ministers, but rather to highlight how the system operates and the effect that potentially has on New Zealand’s reputation.

Perhaps it wasn’t the intention of RNZ or Paterson, but Hager and Labour and the Greens were hard out targeting the government, with the assistance of RNZ and TVNZ.

In the end it is up to New Zealanders to decide how much they care, and whether they want to see this kind of activity continue in their country.

It’s also up to New Zealanders to decide how much they care about objective and unbiased investigation and reporting.

Using Nicky Hager as the main messenger is not a great way to make the country care about an issue.

In answer to the headline question, here are the current most read articles at NZ Herald:

  1.  The 14-year-old boy who turned down $44 million
  2.  Bachelor break-up: Jordan’s friends come to his defence
  3.  Duncan Greive: The hot mess that is The Bachelor NZ
  4.  Shane Watson: Kate Middleton needs a style update
  5.  Interactive: What CEOs of top NZ companies earn

And if I look right now on the One News main page I have scrolled down to see about a hundred stories and can’t see a single one on the Panama papers.

If you look hard you might see a link in the top right to THE PANAMA PAPERS. But not even One News seems to care about the big stories they were pushing earlier this week.

Maybe if the Batchelor had a trust it might make the headlines over and over and over.

Little versus Key on overseas trusts

In Question Time in Parliament today:

1. Tax System—Overseas Trusts

[Sitting date: 10 May 2016. Volume:713;Page:1. Text is subject to correction.]

1. ANDREW LITTLE (Leader of the Opposition) to the Prime Minister: Does he stand by his statement, “There’s actually quite legitimate business in New Zealand for servicing foreign trusts”?

Rt Hon JOHN KEY (Prime Minister): Yes. As Michael Cullen said in 2005, when the disclosure rules were being developed: “The government has sought to develop policy that works for all concerned, one that enables New Zealand to co-operate with other tax jurisdictions while not disrupting the legitimate financial transactions of foreign trusts.”

Andrew Little: Are foreigners able to use New Zealand – based trusts to dodge tax overseas?

Rt Hon JOHN KEY: Anyone can use the New Zealand tax rules. There are obviously mismatches around the world, and we see that, potentially, with multinationals and others. But, interestingly enough, when it comes to ensuring that people are paying their tax, including foreign trusts, the House might like to know that of the Panama Papers data release, of the 500,000 times that Mossack Fonseca is linked to either a company, a trust, an individual, or a reference, 200—less than 200 are foreign trusts registered in New Zealand. And, by the way, the Inland Revenue Department (IRD) has cross-referenced them, and all of them are disclosed to ensure that they pay their fair share of tax. [Interruption]

Mr SPEAKER: Order! Before I call a further supplementary question, I just want a little less interjection from my left.

Andrew Little: How does he reconcile his claim that his close personal adviser had assured him that he had no links with Mossack Fonseca with today’s revelations that show that Mr Whitney has—[Interruption]

Mr SPEAKER: Order! I sought some further cooperation from my left. I am now asking for the same sort of cooperation—less barracking through the question as it is being delivered—from my right. Would Andrew Little like to start that question again.

Andrew Little: Thank you, Mr Speaker—

Hon Paula Bennett: Sorry, sir, for laughing at his joke.

Andrew Little: Yeah, yeah. You have got plenty to laugh at, Paula—plenty to laugh at on your side. [Interruption]

Mr SPEAKER: Order! If I do not get any assistance from my right-hand side, then I will be looking to ask a member to leave.

Andrew Little: How does he reconcile his claim that his close personal adviser had assured him that he had no links with Mossack Fonseca with today’s revelations that show that Mr Whitney has had dealings with that firm?

Rt Hon JOHN KEY: Firstly, I have got no responsibility for Mr Whitney or any other New Zealander. But I stand by the statements that I have made in relation to Mr Whitney. I think incrimination by insinuation could be a very dangerous game, because I took a moment to just look in the database, and guess who is a beneficiary of one of the trusts? Oh, Greenpeace International. And guess who else is mentioned—

Mr SPEAKER: Order! [Interruption] Order! The Prime Minister will—[Interruption] Order! The Prime Minister might think that he can go on, but when I stand to my feet he certainly cannot go on. [Interruption] Order! If I have to ask—[Interruption] Order! No, the member will resume his seat. If I have to ask either the Prime Minister or the Deputy Prime Minister to leave, I will not hesitate to do so.

Andrew Little: Does he see any issue with the people lobbying the IRD to protect foreign trusts having connections to Mossack Fonseca?

Rt Hon JOHN KEY: Firstly, I reject the last part of it. But I do not see any issue with a lobby group speaking to the Government. In fact, I am sure that the education sector and teachers speak to the education Minister. I am sure those who are interested in health and safety speak to the workplace. I am sure the Council of Trade Unions talks to the Labour Party. Here is breaking news: people who work in an industry might actually want to talk to the Government about it. If you are going to hang them for that, there are going to be a lot of hangings taking place.

Andrew Little: Did he personally push through the zero rating of tax on foreign funds in 2010 over the objection of officials from the Ministry of Economic Development or, put another way, does he recall saying: “I have told Gerry to deliver me a paper that has zero rating of funds”?

Rt Hon JOHN KEY: No.

Andrew Little: I seek leave to table a copy of an article from the New Zealand Herald of 2 December 2010—[Interruption]

Mr SPEAKER: Order! When a point of order is raised, it is to be heard in silence, and that particularly applies to noise coming from my back right-hand side. But if it is a newspaper article, then members can find it if they want.

Grant Robertson: You did it, John.

Mr SPEAKER: Order! Is Mr Robertson ready?

Andrew Little: Is he satisfied with the Government’s oversight of foreign trusts, when Mossack Fonseca used a bankrupt Elvis impersonator to provide a sham address for a player in an Iraqi bribery scandal, all without his Government noticing?

Rt Hon JOHN KEY: Yes, it is true. There is an Elvis impersonator that is named, but there is also an impersonator for the Leader of the Opposition asking questions about it.

Andrew Little: Does he oppose New Zealanders and multinationals using another country’s tax laws to dodge New Zealand tax, given that he allows foreigners to do the same thing here?

Rt Hon JOHN KEY: I cannot talk for Greenpeace, Amnesty International, and the Red Cross, but what I can say is that every country has a different tax system. There is no global tax system, and there are mismatches around the world—that is true. The Government is working on trying to resolve those issues through the OECD and we have been leading a lot of that work. And I hope we are successful in that, because that will help, actually, robustness around the world. But New Zealand’s tax laws are very well set.

Andrew Little: Why does he say that New Zealand is falling down the Corruption Perceptions Index on his watch?

Rt Hon JOHN KEY: There are a number of factors, but New Zealand is ranked extremely highly—[Interruption] We are third, I think—[Interruption]

Mr SPEAKER: Order! Prime Minister, there is no point in answering a question asked if they do not want to hear the answer.

Panama papers investigation – “NZ a tax haven”

Nicky Hager says “What the Panama Papers show without any doubt at all, absolutely conclusively, is that New Zealand is functioning as a tax haven.”

That in itself may or may not be a serious issue for New Zealand. Any country can potentially be used in some way by someone as a tax haven.

It could be argued that Inland Revenue enables tax evasion because some people in New Zealand evade tax. Should we clamp down on the grey economy?

The key issue is whether New Zealand allows trusts that are out of the ordinary and what trusts are used for here can’t be used elsewhere.

Does New Zealand need to clamp down on trusts? Or are we just one option for rich people wanting to hide income and if we weren’t available they would simply do it somewhere else?

If the latter then it is an international issue and the motives for singling out New Zealand should be examined.

Nicky Hager has a reputation for politically loaded revelations so this will require substantial balanced analysis.

One News: Panama Papers investigation: ‘NZ absolutely, conclusively is a tax haven’

Tens of thousands of Panama Papers documents reveal how New Zealand, Niue, The Cook Islands and Samoa have become prime destinations for the rich to hide their financial secrets.

 The documents have been subject of an investigation by ONE News, in partnership with RNZ News and investigative journalist Nicky Hager.

Hager says: “What the Panama Papers show without any doubt at all, absolutely conclusively, is that New Zealand is functioning as a tax haven.”

It can be revealed that at the centre of the New Zealand operation is Roger Thompson, a former Inland Revenue worker.

His accountancy firm – Bentleys, in the heart of Auckland’s business district – is the New Zealand agent for Panama law firm Mossack Fonseca.

Mr Hager describes it as “an ordinary office in the middle of Queen Street where nobody would look and where it’s only inside the computer files and the filing cabinet that you would realise that that is the centre of all kinds of tax haven activity in our country”.

For $4000 this New Zealand agent creates trusts for wealthy foreigners who use New Zealand’s limited disclosure rules to stay anonymous, even to tax authorities.

An admin fee of almost $3000 a year will see Bentleys send a one-page form to Inland Revenue. It confirms foreign trust clients don’t need to pay any tax under New Zealand law.

Mr Hager says: “IRD never knows who the real people are who are behind these trusts. They never get to see the accounts. They never get to see what business they’re doing.”

The point has just been made on Breakfast that what is happening in New Zealand isn’t illegal.

Andrea Vance has fronted the One News investigation – working closely with Nicky Hager – and she made the point that it raised important moral questions that needed to be considered.

The investigation into the Panama Papers New Zealand is a journalistic collaboration by reporters from ONE News, RNZ News and investigative journalist Nicky Hager.

It may be difficult separating political activism from legitimate legal and financial issues.

So it needs to be properly thrashed out whether New Zealand should allow this legal activity (legal on the New Zealand trust side of things at least).


Radio NZ:

Panama papers: more on NZ to come

Peter Bale, head of the Center for Public Integrity involved with the investigation of and release of the Panama papers, says that it will take time to analyse the huge amount of data but is certain there will be New Zealand information revealed.

“You can be absolutely certain, I think, or as near to certain that there will be significant numbers of New Zealanders and of New Zealand entities, certainly New Zealand entities, within this data set.”

Bale was interviewed on The Nation this morning. This will be repeated tomorrow morning, or you can see the interview here.

Interview transcript relevant to New Zealand:

Lisa Owen: And turning to New Zealand, then, when will New Zealand be available? Have you looked at any New Zealand data yet? Will you look at it? What’s happening with the New Zealand side of things?

Peter Bale: I haven’t personally looked at New Zealand data. I haven’t personally been a journalist working on the project. I’m responsible for them, but I’ve left that very much to them. But I discussed it with them today. We have not had a media partner in New Zealand particularly on this project. There’s a number of countries where we just were unable to stretch fully to covering every country.

You can be absolutely certain, I think, or as near to certain that there will be significant numbers of New Zealanders and of New Zealand entities, certainly New Zealand entities, within this data set.

The history of New Zealand’s position on offshore companies, people registering trusts there from offshore and also things like New Zealand’s relationship with Niue and some of the other places that we know Mossack Fonseca has used, means that you should assume that there is a very strong New Zealand connection, and certainly with New Zealand-registered companies there.

Lisa Owen:  Sure. And will there be New Zealand names as well? Will there be New Zealand people as well?

Peter Bale: You can assume that too, I think, based on a discussion I had with my team today about this. And going back to some of the history that there’s been over the last four years and beyond with New Zealand companies and New Zealand individuals who have been active in this area of offshore companies and perhaps working with Mossack Fonseca, we’re pretty certain that there will be New Zealand names in there.

I just can’t go into more detail than that at the moment, purely because I haven’t looked at the data myself and we need to go deeper on it. But it is one of the countries that we… We now have many, many requests from media organisations who were not part of the wider team and from countries where we were unable to get to, or even whole industries that we were unable to analyse.

And so there’s still much more to come, I’m afraid. Actually, I’m not afraid of that; I’m quite excited by that. Still much more to come.

Lisa Owen: Okay. Some people will be afraid and others obviously excited. 12,000 trusts are here in New Zealand all because of this kind of tax avoidance. Does that make New Zealand a tax haven in your view, these 12,000 trusts?

Peter Bale: So, I’ve discussed this with my colleagues. I am not an expert, personally, in this area. Gerard Ryle, the director of the ICIJ, certainly believes that New Zealand is a favourable country for this kind of activity.

And I think New Zealand too knows that it has some issues with the ease of setting up trusts and the way trusts are identified. I think even the prime minister there has talked about this and noted that your trust law was last revised in 1988. So I think New Zealand recognises that there are issues there itself.

And I did note before I came here, New Zealand rates number four on the Transparency International Corruption Index, just under most of the Scandinavian countries, and Australia is number 13, so we all have issues in this area. But I am told that New Zealand does have some issues in this trust area, but I wouldn’t pretend to be an expert.

Report and full transcript at NBR: Kiwi at heart of Panama Papers leak ‘certain’ New Zealanders will be named


Panama papers, Putin and the US

Vladimir Putin was implicated by recently released Panama papers, but Putin claims the release was part of a US plot to weaken Russia.

The US State Department has rejected Putin’s allegations

NZ Herald: Putin says Panama Papers part of US plot to weaken Russia

President Vladimir Putin has denied having any links to offshore accounts and described the Panama Papers document leaks scandal as part of a U.S.-led plot to weaken Russia.

Putin also defended a cellist friend named as the alleged owner of an offshore company, describing him as a philanthropist who spent his own funds to buy rare musical instruments for Russian state collections.

Speaking at a media forum in St. Petersburg, Putin said Western media pushed the claims of his involvement in offshore businesses even though his name didn’t feature in any of the documents leaked from a Panamanian law firm.

Putin described the allegations as part of the U.S.-led disinformation campaign waged against Russia in order to weaken its government.

“They are trying to destabilise us from within in order to make us more compliant,” he said.

The Washington-based International Consortium of Investigative Journalists said the documents it obtained indicated that Russian cellist Sergei Roldugin acted as a front man for a network of Putin loyalists, and, perhaps, the president himself.

The ICIJ said the documents show how complex offshore financial deals channeled as much as $2 billion to a network of people linked to the Russian president.

Putin said Roldugin, a longtime friend, did nothing wrong. He said he was proud of Roldugin, adding that the musician spent his personal money to advance cultural projects.

The US State Department has responded.

State Department spokesman Mark Toner rejected the notion that the U.S. is behind the allegations. “I would reject the premise or the assertion that we’re in any way involved in the actual leak of these documents,” he told reporters in Washington.

The lack of prominent Americans named so far in the Panama papers raised some suspicions that the papers may have been filtered by someone with targeted interests. An explanation has been put forward – Mossack Fonseca simply didn’t have many US clients.

Washington Post reports:

One nagging question since the Panama Papers story broke is why so few prominent Americans have so far shown up holding offshore accounts.

The lawyer at the center of the scandal has an explanation: he prefers not to have them as clients.

In an interview with The Associated Press, Ramon Fonseca said that he and his German-born partner at Mossack Fonseca like to vacation in the U.S., but they have longstanding ties to Europe and have always focused their business there and Latin America. The few American clients the firm has taken are mostly to handle visas and other requests from Panama’s burgeoning expatriate retirement community.

Germany’s Sueddeutsche Zeitung, the newspaper that first obtained the 11.5 million confidential documents that make up the Panama Papers, said the files included copies of 200 American passports and 3,500 shareholders in offshore companies listed U.S. addresses. That’s a small fraction of the more than 220,000 offshore companies Mossack Fonseca says it has created in the past four decades.

No doubt there is a lot to come out yet.


The Panama Papers

The leak of the Panama Papers (“the secrets of dirty money”)  looks massive. It will presumably take some time for all this to be sifted and the key information clarified.

This Is the Leak

2.6 terabytes, 11.5 million documents, and 214,000 shell companies: The Panama Papers are the largest data leak journalists have ever worked with.

Claims of New Zealand complicity: Panama Papers: New Zealand is ‘complicit’ in tax avoidance schemes – expert

Foreign trusts were thrown into the spotlight this morning, when New Zealand was named in a massive leak of documents from Panamanian law firm Mossack Fonseca.

According to The International Consortium of Investigative Journalists, the 11.5 million document trove show that the law firm’s services appear to have been used to “facilitate massive money laundering, tax avoidance and criminal activity, including drugs and arms dealing”.

While ths country is named by the ICIJ as a “tax haven” used by Mossack Fonseca, New Zealand entities only make up a tiny proportion of those cited in the scandal.

Critics are quick off the mark:

New Zealand is complicit in tax avoidance schemes, says an academic.

“It’s shameful for New Zealand to be caught up in international tax avoidance,” Deborah Russell from Massey’s School of Accountancy said this afternoon.

“The loophole in our laws that allows New Zealand foreign trusts to escape taxation has been known about for years, but nothing has been done to shut it down. This makes us complicit in schemes to avoid tax,” she said.

It’s fair to point out that Russell was a Labour candidate last election.

Another tax law expert has also said that the rules around the what foreigners with New Zealand trusts must disclose to Inland Revenue are “weak”.

Revenue Minister Michael Woodhouse, however, said it was “ridiculous to suggest that New Zealand is a tax haven”.

“Tax havens thrive on secrecy,” Woodhouse said.

“Our tax rules require foreign trusts to be registered. We also have a strong tax treaty network with the express purpose of discovering and preventing tax avoidance by exchanging information between tax jurisdictions,” he said.

There’s sure to be a lot more to be said about this, both internationally and in New Zealand.