EU investigating NZ as tax haven

Newshub reported tonight that the European Union is investigating whether to include New Zealand on a tax haven black list or not.

Investigation by EU as it prepares a blacklist of global tax havens


More details: EU considers blacklisting NZ over tax laws

New Zealand is under investigation by the European Union as it prepares a blacklist of global tax havens.

The grouping of 28 European nations has compiled a list of countries with lax tax laws, but following the release of the so-called Panama Papers it has confirmed that New Zealand is under investigation.

The EU loses around $NZ1 trillion to tax havens each year, and it intends to put a stop to the practice by threatening a raft of sanctions against countries which don’t comply to its standards.

New Zealand doesn’t comply, even when the recommendations made by tax expert John Shewan as a result of the Panama Papers are included.

What the EU wants:

  1. No anonymity – trust settlers and beneficiaries are identified and changes are recorded. New Zealand will meet this standard when Mr Shewan’s changes are introduced.
  2. Collection of information about financial assets – where the funds came from, the current assets, where they are, and the income earned in the past year. New Zealand will meet this standard when Mr Shewan’s changes are introduced.
  3. No tax exemption of foreign income. New Zealand will NOT meet this standard even when Mr Shewan’s changes are introduced.
  4. Automatic exchange of information with foreign tax authorities in the jurisdictions where the settlers and beneficiaries are resident. New Zealand will NOT meet this standard even when Mr Shewan’s changes are introduced.
  5. A public register of trust ownership and details. New Zealand will NOT meet this standard even when Mr Shewan’s changes are introduced.

Non-complying nations face:

  1. Trade sanctions
  2. Suspension of negotiations for a free-trade agreement
  3. Possible travel bans or visa restrictions.
  4. Sanctions against companies, banks, tax advisers, accountancy and law firms involved in tax deals.

Shewan versus Little on no apology

John Shewan has released a letter he sent to Andrew Little’s office in June requesting an apology for Little’s remarks alleging Shewan’s involvement in helping the Bahamas preserve it’s tax haven status.

See Little slams Shewan who slams Little for the original allegations and Shewan’s response in April.

Shewan released the letter after Little this morning claimed he had not been asked to apoplogise.

Shewan’s letter to Little on June 10:

The suggested response is not acceptable. It does not recognise the severity of the incorrect statement made by Mr Little.

It’s reasonable to expect a person in Mr Little’s position to understand the impact and damage the statement he has made would have on me personally and the potential they have to negatively impact my business now and in the future.

I have been fair and extremely patient. It is close to two months since Mr Little caused me and my family considerable stress and humiliation.

My efforts to address the issue in a fair and timely way were responded to by procrastination and vain efforts to fob me off, whereas they could and should have brought a prompt resolution to this matter.

The statements made were patently wrong and damaging to my reputation and I now require an unqualified retraction which will go some way towards mitigating the damage that has already been caused.

A correction along the lines you are suggesting would be unacceptable.

I now request the statement I sent to you yesterday be issued with the following additions: ‘I apologise to Mr Shewan for any embarrassment I have caused him through my statements’.”

Please advise Mr Little’s position by 5pm today.

NZ herald reported earlier today that little was refusing to apologise and had not been asked by Shewan to apologise: Andrew Little on John Shewan: I will not apologise

Following the release of Mr Shewan’s inquiry yesterday, Mr Little said he did not need to go further.

“He explicitly said I don’t need you to apologise, I want a correction of a statement, and that’s what I’ve done,” he told reporters this morning.

And NZH later today: John Shewan says Andrew Little’s claims are misleading

When asked again to confirm that Mr Shewan had not asked for an apology, Mr Little said: “That’s my recollection of the first face-to-face discussion that we had.”

Little should be having a field day slamming John Key’s switch from denial there was any trust or disclosure issues to supporting the bulk of Shewan’s report and it’s recommendations to toughen up on trust disclosure requirements.

And David Seymour has highlighted Labour’s own shift in attitude on the trust issue and on Shewan’s report.

Andrew Little, then:

“John Key’s decision to appoint John Shewan to review New Zealand’s dodgy foreign trust rules shows a serious lack of judgement . . . A closed door review led by Mr Shewan will not restore our international reputation which has been so damaged by the Panama Papers.”

Grant Robertson, now:

“John Shewan’s report into foreign trusts is a rebuke to John Key . . . Labour supports the improved disclosure and transparency recommendations of the Shewan report. These will make for a system that is more open and will give foreign Governments greater ability to track down those who are avoiding their tax obligations.”

It’s no wonder Labour are struggling to get anywhere despite the growing number of  problems and stuff-ups the Government has been accumulating.

UPDATE: Andrew Little in Parliament today:

Andrew Little: If at least one member of the House is capable of accepting when he has got it wrong and publicly acknowledging that, when is he going to acknowledge to the public of New Zealand that he misled them about the state of our foreign trust tax laws?

Little versus Key on trusts and havens

In question time in Parliament today Andrew Little and John Key clashed over foreign trusts and tax havens following the release of the Shewan report.

Tax System—Overseas Trusts and Disclosure Regime

2. ANDREW LITTLE (Leader—Labour) to the Prime Minister: Does he stand by his statement that “tax havens are where there is non-disclosure of information. New Zealand has full disclosure of information”, given the Shewan report “concludes that the existing foreign trust disclosure rules are inadequate” and “not fit for purpose in the context of preserving New Zealand’s reputation”?

Rt Hon JOHN KEY (Prime Minister): Yes, and I note that Mr Shewan this morning confirmed that New Zealand does currently have full disclosure of information. As he explained, records are required to be maintained by trusts, and if they are asked to exchange that information, they must do so. Mr Shewan has recommended extra measures that will see that information provided to the Inland Revenue Department (IRD) through a searchable register.

Andrew Little: Does he agree with the Shewan report that “there is a reasonable likelihood that the regime is facilitating the hiding of funds or evasion of tax”; if so, why has he consistently denied that there is a problem?

Rt Hon JOHN KEY: I cannot confirm that one way or the other, because I do not have any access to the source document, and Mr Shewan himself was unable to find any evidence that that was the case.

Andrew Little: Does he agree with the Shewan report that “under current law and enforcement practices the risk of detection by authorities is low.”; if so, why has he consistently claimed there is no problem?

Rt Hon JOHN KEY: I certainly agree with Mr Shewan that there can be improvements, because by having that information at the IRD’s level in the searchable register, it makes it easier. But New Zealand has complied with every request it has had. The same information will still be collected, and in fact under the changes that the Government has made, including the extension of the automatic exchange of information, the rules around the Foreign Account Tax Compliance Act, and others, have shown that, actually, New Zealand, by the way, does have that information and it does give full disclosure.

Tim Macindoe: What does the independent Shewan report have to say about claims that New Zealand is a tax haven?

Rt Hon JOHN KEY: It concludes that such claims are wide of the mark. The report says: “The tax treatment of foreign trusts follows New Zealand’s long established and principled policy of not imposing New Zealand tax on foreign source income derived by non-residents.” The report goes on to say: “It does not result in New Zealand being a tax haven under established OECD criteria.”

Andrew Little: Does he agree with the Shewan report that “… New Zealand is part of a global tax police force … to clamp down on aggressive tax practices.”; if so, why has he allowed New Zealand trusts to dodge other countries’ tax?

Rt Hon JOHN KEY: New Zealand’s primary purpose, from an IRD perspective, is to preserve our own tax base. Of course, it is also to have good international tax practice, and we do. As the Shewan report quite correctly says, New Zealand ranks right at the top for best international tax practice.

Andrew Little: Which is true: his claim that we provide full information to other Governments, or the Shewan report’s finding that “the paucity of information currently disclosed … appears to limit IRD’s ability to proactively provide assistance to foreign revenue authorities.”?

Rt Hon JOHN KEY: The member is selectively trying to quote from John Shewan, when this morning he made it quite clear onMorning Report that, in fact, actually, the situation is that New Zealand does have full disclosure. Mr Shewan is not recommending a significant widening of the amount of information collected; what he is recommending is that there should be a searchable register held at IRD’s level.

Tim Macindoe: What reports has the Prime Minister seen on the appointment of Mr Shewan to lead the independent inquiry into foreign trust disclosure rules?

Rt Hon JOHN KEY: I have seen several reports. The first was the joint statement from the finance Minister and revenue Minister describing Mr Shewan as “a highly regarded tax expert”. A second report claimed Mr Shewan had advised the Bahamas on how to preserve its status as a tax haven. This led to a third report—interestingly enough, actually, released 2 hours before an All Blacks test match—where the same source admitted he was completely—

Mr SPEAKER: Order! I thank the Prime Minister but I do not see any ministerial responsibility. [Interruption] Order! I want substantially less interjection from members to my right.

Andrew Little: If at least one member of the House is capable of accepting when he has got it wrong and publicly acknowledging that, when is he going to acknowledge to the public of New Zealand that he misled them about the state of our foreign trust tax laws?

Rt Hon JOHN KEY: I have not misled the New Zealand public. We certainly commissioned a report and made sure that that report comes up with some recommendations. But if I had misled the New Zealand public, I would not hide behind the liniment bottles and try to release that apology 2 hours before an All Blacks test match and pretend no one saw it. I would have the courage of my convictions.

Andrew Little: Why did he block efforts to fix foreign trusts in 2013, when the Shewan report finds that they helped tax evasion, that the risk of getting caught is low, and we do not give assistance to countries trying to stop tax-dodgers?

Rt Hon JOHN KEY: In answer to the first part of the question, the member is incorrect. In answer to the second part of the question, the Shewan report makes it quite clear that New Zealand has a very high international reputation. In fact, it says that the only damage done is by misguided New Zealand politicians trying to score domestic political points, and in fact internationally there was virtually no coverage of New Zealand, because it is well respected for what it does.

Andrew Little: Is it not time for him to stop playing silly buggers and admit what the IRD told him in 2013, what John Shewan told him last week, and what every New Zealander knows: that his Government has been harbouring foreign tax-dodgers for far too long?

Rt Hon JOHN KEY: The member, if he wants to look at responsibility, should get out a mirror, and stop apologising to John Shewan 2 hours before an All Blacks test match, and have the guts to get up and say it in this Parliament—that he is sorry.

‘Extremely damaging’ tax haven label

On Q & A today Peter Dunne said that if the label of ‘tax haven’ sticks it could be very damaging to New Zealand.

Opposition parties Greens and Labour have been promoting the label in their attacks on the Government and John Key. Key disputes the description, saying that it doesn’t apply to New Zealand.

TVNZ: 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. As you said, we’ve had a very good reputation for a long period of time for a very robust, very transparent and a very open tax system – good rules, a clear guidance, etc’. That is being potentially misused in these situation.

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.’

Mr Dunne said had the IRD had concerns about this country’s international reputation when he was in the job he would have taken them ‘very seriously’.

‘And the way it works is that they report on a series of issues that are both current in the New Zealand tax environment or the international tax environment, and clearly the Government would be foolish not to take heed of that advice.’

Interview here.

Labour and Greens have already put attacks on the Government ahead of the good of the country with their attacks on the partial asset sales in 2013, with a number of allegations they drastically reduced the value of the assets that went to market.

How much risk is there that the tax haven label will stick internationally?

Should parties be taking that risk?

Is trying to damage Key’s reputation justified no matter what the risk to the country is?

In Dunne concerned about “extremely damaging” tax haven label – years too late Notices and Features (aka Labour Party?) at The Standard thinks that it’s Peter Dunne who is “waking up at last”. Is it Dunne who is asleep to the risks, or is it Labour?

But who has been promoting the ‘tax haven’ label? Labour and Green parties, MPs and activists.

What is potentially the most damaging, New Zealand’s laws relating to overseas trusts and tax, or establishing a perception that New Zealand is a tax haven?

A slanted Panama/trust poll

Activist group Action Station have commissioned and used a poll as a part of their campaign on tax and foreign trust issues – good on them for pushing for better tax and trust laws, but their polling and publicising are slanted.

The Herald reported on a UMR poll conducted for Action Station:

Panama Papers: Majority of Kiwis ‘concerned’ about New Zealand’s new reputation

Pressure over the Panama Papers on the Government is rising after a poll showed a majority of New Zealanders were concerned about the country’s new reputation as a tax haven.

A poll by UMR Research, conducted for activist group ActionStation, showed 57 per cent of respondents were “concerned” about New Zealand being a tax haven and the misuse of our foreign trust regime for tax evasion purposes. Just 23 per cent said they were “not concerned” about the issue.

ActionStation spokeswoman Marianne Elliot said the results of the poll spoke for themselves.

“A majority of New Zealanders are concerned that sloppy trust laws, left open by the current and former governments, have allowed the world’s rich to avoid paying their fair share of taxes. Most New Zealanders are not satisfied with the Government’s current response,” Elliot said.

But the poll didn’t determine that a majority of New Zealanders thought that. Elliot has embellished the poll results with her own phrases.

Has Matt Nippert misquoted Elliot? No, he appears to have cut and pasted her words from an Action Station press release Poll shows Govt seen to be handling tax haven issue “poorly” apart from removing the first part:

ActionStation spokesperson Marianne Elliott says: “The polling shows that like ActionStation members, a majority of New Zealanders are concerned that sloppy trust laws, left open by the current and former governments, have allowed the world’s rich to avoid paying their fair share of taxes. Most New Zealanders are not satisfied with the Government’s current response.”

Nippert also reported:

The UMR poll, of 750 people between April 14 and 18 and with a margin of error of 3.6 per cent, also asked respondents how they thought the Government had handled the fallout from the Panama Papers and whether they thought the review of foreign trusts by former PWC chairman John Shewan, was an adequate response.

Again that looks to be picked out of the press release. But there was a PDF attached that shows what was actually asked in the poll.

Using a scale of 1 to 5 where 1 means very concerned and 5 means not concerned at all, how concerned are you about New Zealand being a tax haven with foreign trusts being used by people overseas for tax evasion purposes?

  • Concerned (1+2) 57%
  • Neutral (3+ Unsure) 20%
  • Not concerned (4+5) 23%

Elliot portrayed this as 57% versus 23% – excluding 20% stated in the poll as ‘neutral/unsure’. Being neutral could mean unconcerned.

But worse is the loading of the question. It refers to New Zealand ‘being a tax haven with foreign trusts being used by people overseas for tax evasion purposes’ but this is a disputed accusation and unproven.

The second question:

Now, using a scale of 1 to 5 where 1 means very well and 5 means very poorly, how do you think the New Zealand government is dealing with the problem of New Zealand being a tax haven with foreign trusts being used by people overseas for tax evasion purposes?

  • Handling well (1+2) 21%
  • Neutral (3+ Unsure) 33%
  • Handling poorly (4+5) 46%

This is an even more loaded question stating that there is a problem of New Zealand  being a tax haven and is used for tax evasion purposes.

The third question:

As you may be aware the government has appointed John Shewan, former chair of PricewaterhouseCoopers, to review New Zealand’s foreign trusts laws. Do you think that this is an adequate response to the foreign trusts issue or do you think a full public independent enquiry is needed?

  • An adequate response 31%
  • A full public independent inquiry is needed 52%
  • Neither/unsure 17%

As well as this question implying that John Shewan’s inquiry may not be be full or independent it (Action Station) chooses to describe Shewan as “former chair of PricewaterhouseCoopers”.

They chose not to describe Shewan as:

  • one of the “leading tax practitioners” at PWC over 28 years,
  • nor that after that he was “an adjunct professor of accountancy at Victoria University” since then,
  • nor that he “has been appointed by Labour and National-led governments to official bodies looking into tax”,
  • nor that he served an appointment to the Tax education Office for 9 years,
  • nor that he was part of the Tax Working Group that advised the Government in 2009,
  • nor that he is “an established commentator on tax and policy matters,
  • nor that he has been involved also in a number of high-profile tax cases”.

Source Radio NZ: Who is John Shewan?

Action Station asked the questions they wanted to, got the results that they wanted,  Elliot embellished the results with her own phrases, and Nippert seems to have simply quoted her press release.

Before having this poll done Action Station had already decided their stance – see New Zealand is a Tax Haven. Prime Minister, this needs to change.

All this media attention has created an opportunity for change by exposing New Zealand’s role in endorsing international tax dodging. We need to move quickly to seize this opportunity and call for real change, making sure the message that our trust laws need to be reformed is at the centre of the debate.

So sign the petition now calling for our government to close the loopholes that allow the world’s rich to escape paying their fair share in tax by using foreign trusts in New Zealand. We do not want New Zealand to be a tax haven for the world’s wealthiest 1%.

This is how Action Station describes themselves:

ActionStation is here to help defend our common goals; a fair society, a healthy environment and accountable politics through effective online issues-based campaigning.

They should be held accountable too, in this case for using questionable poll practices and then misrepresenting the results as a part of their campaign.

I’m all for questioning whether our tax and trust laws and practices are good enough. I look forward to the result of Shewan’s inquiry.

But I think a fair society needs fair campaigning on issues, and fair use of polling in campaigning.

Little unrepentant, Shaw sensible

Andrew Little is so far unrepentant after attacking tax expert John Shewan in Parliament, although has tried to shift the focus of his attack onto John Key.

In contrast Green co-leader James Shaw has taken a much more sensible tack. However his sort of reason is drowned out by the Little storm.

Radio NZ: Tax reviewer allegations a ‘storm in a teacup’

The Labour Party is not resiling from its latest attempt to discredit the man appointed to carry out a review of foreign tax rules, John Shewan.

In Parliament, Labour leader Andrew Little accused Mr Shewan – appointed to review the rules on foreign trusts – of giving the Bahamas advice to preserve its status as a tax haven.

Mr Little was asked what evidence he had, other than a newspaper article from the Bahamas.

“I can go on the reports that we have got, the government here has set up a review of our foreign trusts regime, but that review is being conducted by somebody who is now associated at the very least with advice to the Bahamas, a well known tax haven who following that advice has sought to preserve their tax haven status.”

Mr Little made no apology for his comments about Mr Shewan.

“John Shewan is a highly competent tax specialist and tax expert.

This is about John Key’s judgement, this is about his decision-making. He and his cabinet made the decision to appoint John Shewan to do a review into this area that is causing a lot of consternation amongst a lot of New Zealanders.”

Except that Little clearly targeted Shewan – see Little slams Shewan who slams Little and John Shewan on Radio NZ where Shewan says “And it’s very disappointing to hear the statements made today because they’re completely and utterly inaccurate.”

In contrast Green co-leader James Shaw is taking a much more reasonable and sensible approach to the controversy.

Green Party co-leader James Shaw said he did not see anything untoward about Mr Shewan’s trip to the Bahamas.

“Well I’ve been very careful not to target John Shewan personally, and I don’t think that somebody like that should be caught up in the political shenanigans.

That’s something that Little should take on board as an example of leadership with integrity.

“I think the really important thing here is to focus on what does the public need in order to have trust in the credibility of the review that’s been undertaken.”

Mr Shaw said Mr Shewan was obviously a tax expert, but it would be good to have a broader group doing the review.

I agree with Shaw, it would have been better to have had a broader group doing the tax and trust review, but sensible suggestions have been overwhelmed by Little’s lurch into attack politics.

The Greens must despair at Labour’s approach, because it is unlikely to help the chances of a credible Green-Labour coalition.

And I suspect more than a few Labour supporters will be concerned by Little’s line of attack. I’m sure more than a few ex-Labour voters will be disappointed in their ongoing lack of choice.

If the current Opposition gets a shot at forming a coalition it’s likely to be long time political attack mongrel Winston Peters competing with new pup Little for the top dog position of Prime Minister.

It’s no wonder more and more people are being turned off by dirty politics and are turning away from voting.

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

Little slams Shewan who slams Little

In Parliament today Andrew Little slammed tax expert John Shewan, but Shewan slammed Little back for not checking the accusations about the Bahamas with him first, which Shewan says are “completely and utterly inaccurate”.

2.ANDREW LITTLE (Leader—Labour) to the Prime Minister: Does he have any financial interests which may affect his decisions around foreign trusts; if so, what are those financial interests?

Rt Hon JOHN KEY (Prime Minister): No.

Andrew Little: Did he disclose to Cabinet his links to Antipodes Trust Group when making decisions on the review of foreign trusts in New Zealand?

Rt Hon JOHN KEY: I rely on the members knowing about my pecuniary interests.

Andrew Little: Did he send John Shewan and Don Brash to the Bahamas in 2014 to advise that Government on tax matters?

Rt Hon JOHN KEY: Yes. I think they went to talk to them about GST.

Andrew Little: Can he confirm that John Shewan and Don Brash advised the Bahamas that its financial services be zero-rated for value-added tax in order to protect the offshore services industry of that country?

Rt Hon JOHN KEY: No. I am not aware of that level of detail.

Andrew Little: I seek leave to table an article from a Bahamas news outlet, not widely available—[Interruption]

Mr SPEAKER: Order! [Interruption] Order! The member is seeking leave to table a document. I want to listen to what it is. If there are interjections coming from particularly my far-right quadrant, that makes it difficult. Would the member start his introduction again as to what the document is.

Andrew Little: Thank you, Mr Speaker. I seek leave to table a media report from the Bahamas, not widely available, on the advice given by John Shewan and Don Brash to the Bahamas Government to the effect that international financial services be treated as zero-rated to protect—

Mr SPEAKER: Order! The document has been well and truly described. I will put the leave and the House will decide. Leave is sought to table that particular media article from the Bahamas. Is there any objection? There is none. It can be tabled.

  • Document, by leave, laid on the Table of the House.

Andrew Little: Does he not see that there is a fundamental problem with appointing a person to review our foreign trust laws who has advised a Government on how to protect its tax haven status?

Rt Hon JOHN KEY: The member has proven over the last 2 weeks that he is completely unfit to judge who—

Mr SPEAKER: Order! [Interruption] Order! That is a straight personal reflection on the member who has asked the question, and that will be ruled out of order. Would the Prime Minister stand now and answer the question. [Interruption] Well, I have not heard the answer. [Interruption] Order! I have not heard the answer, so I am going to invite the member to re-ask the question so I can hear the answer.

Andrew Little: Does he not see that there is a fundamental problem with appointing a person to review our foreign trust laws who has advised a Government on how to protect its tax haven status?

Rt Hon JOHN KEY: I cannot confirm whether the Bahamas is a tax haven or not—I simply do not know. I do not think the member would know either.

Radio NZ followed up with Shewan: Trust reviewer rejects Labour’s Bahamas accusation

Labour leader Andrew Little has accused John Shewan, who has been appointed to review New Zealand’s rules on foreign trusts, of giving the Bahamas advice to preserve its status as a tax haven.

Mr Shewan told RNZ News the trip to the Bahamas had absolutely nothing to do with its status as a tax haven, and any suggestion of that was complete nonsense.

He said that the prime minister of the Bahamas had asked the New Zealand government to provide people to assist with putting GST in place in the Bahamas.

“Mr Key requested Don Brash and myself to go up there which we did.

“We recommended that they modify their proposed regime significantly and simply follow New Zealand’s rules across the board.”

Mr Shewan said they did recommend backing an existing exemption, as per international practice, that financial services be exempt from GST.

It appears that Little hasn’t bothered to check things out adequately, or he doesn’t care about facts as he continues his tax attacks against Key and Shewan.

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

Nash responds to Peters’ attack

In Parliament on Thursday Winston peters attacked Inland Revenue’s international revenue strategy manager, John Nash – see Two strikes for Peters – and then again in a media release – see Winston Peters – whinebox.

Nash has responded.

Stuff: Panama Papers: NZ foreign trust disclosure enough to create ‘audit trail’

The IRD’s manager of international revenue strategy, John Nash, said he feels “a little bit beaten up on this” when by international standards New Zealand is “at the top of the class” – and that was before NZ First leader Winston Peters targeted him by name in Parliament on Thursday.

Nash conceded some would describe the initial disclosure as “brief”.

“As far as we are concerned it’s sufficient for us to have an audit trail.”

The key was the NZ-based trustee, who was required to keep detailed records which the IRD could access and pass on to overseas authorities.

Trustees generally kept good records.

Nash denied “absolutely” that New Zealand is a tax haven.

He said New Zealand also had a “100 per cent” record responding to requests from overseas tax authorities.

Many critics misunderstood tax regimes around the world. Some did not tax offshore trusts and others did not levy tax until assets in the trust were repatriated.

There was no “universal tax code that we are all part of”, as some had implied.

New Zealand rules  were tight on offshore investments by residents, though that may not be the case for other countries.

“The level of interest in New Zealand foreign trusts may not be necessarily as high as some might make out in the media.”

Authorities could track investments through their compliance and audit work, which could mean either “following the money” or a document trail  If they saw a link to a foreign trust they could ask for information and that would be passed on.

IRD would hand over information to other countries “if they expressed an interest in receiving that information”.

“We would listen, and I can’t say definitively we would start exchanging in the same way we do with Australia, but that’s a possibility.”

IRD does “spontaneously” pass on information if it finds something suspicious or untoward. It had exchanged information with more than 20 countries and had looked at “quite a number” of the almost 12,000 foreign trusts set up in New Zealand.

The flipside was that other countries did not provide the same level of disclosure to New Zealand. “We are quite an exception on doing that,” Nash said.

IRD had reviewed all the major agents who set up trusts and companies. “We’ve had quite a sweep of the industry.

Since then Peters has called for an inquiry into the Panama papers but hasn’t been specific about what he thinks any possible problems might be.

This seems to be vintage Peters, asking for others to investigate something based on his vague allegations and insinuations.


Land of the large grey crowd?

Should New Zealand be a tax haven for retirees? A petition has been presented to Parliament to promote the idea – and Winston doesn’t seem to be involved.

Call for NZ to be tax haven for retirees

American Henry Work wants New Zealand to become a tax haven for financially independent retirees who have fallen in love with the place.

He reckons the country should devise a visa system for retirees who want to spend their remaining years here and provide an economic fillip to the towns they settle in.

Work moved to Nelson five years ago on a business visa and, because he wants to stay, has devised the basics of a visa category for financially independent retirees.

Local MP Nick Smith has tabled a petition in Parliament, put together by Work and signed by about 300 people, asking that the Department of Immigration investigate changes to regulations that would make New Zealand an attractive retirement hub.

The core of Work’s plan is that retirees moving here would have to pay their own way and make no call either on the benefits system (including NZ Super), or the health system. That would inject money into the economy, which is a high priority for the Government, he said.

His plan includes a possible requirement for the retirees to pay a bond in to a government-operated trust fund which would be available should they need medical treatment they are unable to directly pay for.

In return, the visa would allow the retiree to stay as long as they wanted, with freedom of entry and exit at will, just as other New Zealanders have.

He would like to see them have certain civic rights like being able to vote and purchase medical insurance, and, perhaps controversially, he would ultimately like them to gain the right after a certain number of years to become eligible for permanent residency, and then citizenship.

He imagines such a system would naturally exclude those with certain criminal convictions, as well as those in poor health, and the retirees would be taxed only on income arising in New Zealand. They would also pay tax through the GST system, and other levies.

Work said the current visa system allowed overseas retirees to make short stays of three to six months without too much trouble, and for some with relatives here to even qualify to settle. Some could also buy businesses. But he felt New Zealand was missing a trick.

Would that mean we could become the Land of the large grey crowd? We’re already heading that way – Peter Dunne pointed out:

In Nelson and parts of the Bay of Islands I think it is already.

I can think of some prssible problems with this but will leave this open for coment.