Guyon Espiner had a story on 60 Minutes last night about New Zealand’s status as an offshore tax haven for wealthy foreigners. Apparently there are tens of billions of dollars – mostly from high net-worth individuals in South America – sitting in New Zealand foreign trusts. And as part of that story Espiner interviewed Revenue Minister Peter Dunne and asked him if it was moral for the New Zealand government to structure its trust laws in a way that allowed very wealthy people to avoid their tax obligations to their own governments.
Now, Dunne could have said a lot of things here. He could have pointed out that this money mostly seems to come from rich people in developing countries, and that it’s not so much about tax evasion than that it is simply prudent for these people to financialise some of their wealth and stick it someplace safe, so that it can’t be wiped out in a crash, or nationalised by their own government, or whatever. And he could have argued that managing this wealth brings tens of millions of dollars into the New Zealand economy in legal and accounting fees.
But he didn’t. Instead Dunne argued that it’s acceptable for high net worth individuals to practice ‘legitimate tax avoidance’ and do everything they can to minimise their tax exposure. Meanwhile, Dunne has been very active cracking down on tax avoidance by salary earners, introducing a ‘paper-boy’ tax cut, taxing staff car parks, and so on. But oversight of the trust industry (or a Capital Gains Tax) is out of the question. Under this government, tax avoidance is only legitimate so long as you’re already rich.
‘Legitimate tax avoidance’ is an idea that’s prevalent in the finance sector. ‘Taxation is theft. The government takes money off genuine wealth producers and destroys it by spending it on schools or hospitals or welfare services instead of creating more wealth by speculating in commodity or currency markets.’ Dunne’s use of the term suggests to me that he’s been ‘captured’ by the finance sector; which would be completely in character, but isn’t a great quality to have in a Revenue Minister.