The Dim-Post

April 12, 2016

Panama Papers thoughts

Filed under: Uncategorized — danylmc @ 8:47 am

As usual, The Wire summed it up best:

You follow drugs, you get drug addicts and drug dealers. But you start to follow the money, and you don’t know where the fuck it’s gonna take you.

Nicky Hager has a post up on Pundit about his involvement with the Panama Papers:

News has been coming out of Washington DC recently of a massive leak of tax haven information. I have spent the past 15 months working on this project, helping to dig through the leaked material to find what should be publicised. It is probably the most secret financial information to reach the public and I hope it will be interesting to share some of the story.

It is a very good time to be shining a light on tax havens. These legal black holes are dotted around the world, partly helping people avoid tax (the traditional picture) but also helping all sorts of people and companies keep their business and crimes secret.

So that’s a fun guessing game for John Shewan as he undertakes his review of our trust laws. There haven’t been any big stories about New Zealand yet. Is that because there aren’t any? Or is that because Nicky Hager is going to write a book about all the New Zealand material?

(Update: My mistake: the Pundit piece by Hager is actually relating to a different tax story three years ago!)

Mike Hosking interviewed John Key yesterday on this subject yesterday. This little snippet about Key’s own financial arrangements intrigued me:

Hosking: Nothing in there that’s going to embarrass you?

Key: Nothing in Panama. No.

Okay then. Key also claims that his assets are in a blind trust, so he doesn’t know what’s in it, so there can’t be any conflicts of interest. That claim has always annoyed me. Key’s trustees don’t liquidate his assets into cash and then reinvest them as soon as they’re signed over to them. If Key owned, say, shares in a property investment company before he became Prime Minister, he still knows that he owns them, even if he doesn’t know their exact worth. But the public can’t see that he does, and Key can pretend that there isn’t a conflict of interest because it is a ‘blind trust’.

In terms of Key’s reversal from last week on whether our trusts need investigation, I wonder if National now have a formal process in which they respond to breaking stories like this. Phase one. Deny everything while blaming Labour. Stage two. Poll. Stage three. If the polling hits some pre-arranged benchmark then reverse your position and/or announce an inquiry.

45 Comments »

  1. I reckon that’s probably how it works. And it works very well, because the polling seems to be very accurate and the occasional abrupt U-turn in policy position never seem to hurt the PM at all. When he does this, it is so fast that it barely seems to attract any comment at all, and certainly not negative comment.

    Comment by Nick R — April 12, 2016 @ 9:00 am

  2. Hosking: Nothing in there that’s going to embarrass you?

    Key: Nothing in Panama. No.

    But where then? ISTM that the PM does have stuff likely to embarrass him, just not in Panama.

    Comment by Stephen — April 12, 2016 @ 9:03 am

  3. My god, a government that often listens to public opinion and/or waits to see if there is substance in an issue. Is that weird or what? Surely you don’t expect a government to announce an inquiry into a subject the moment it becomes a news story or an issue in Parliament. The public sector would be engaged in nothing but inquiries if that were the case. Some issues resonate and some don’t. Some issues have substance and some don’t. Some issues have legs and others don’t…….Once again, the test is what would you be saying if the incumbent government was one you favoured. I can see the blog post now demanding a measured response to the issue du jour.

    It must be tough being Nicky Hager. I suppose there are pleasures to be had in being the nation’s Witchfinder-General but I struggle to see them.

    Comment by Tinakori — April 12, 2016 @ 9:06 am

  4. Tinakori’s comment shows how grateful we should be that this story was broken overseas. Had it been Hager, then the instant mud-chucking would have obscured the huge importance of the story. But it’s harder to spout “Witchfinder-General” nonsesne about the Suddeutsche Zeitung and the BBC and the rest of the world’s media.

    Even though they’re members of exactly the same consortium, doing exactly the same job.

    Comment by sammy 3.0 — April 12, 2016 @ 9:15 am

  5. I’ve worked in the foreign trust industry and I have to say NZ’s regime clearly needs reform and for most of the past two decades has been more poorly regulated than many traditional tax havens like the Caymans. I have two major concerns as things currently stand:

    Firstly, the IRD simply does not collect sufficient information on the beneficial owners of New Zealand foreign trusts, because it does not have the power to. Currently these trust companies establishing these trusts are only required to provide the name of the trust and the name of the trustee to IRD. If a foreign tax authority suspects one of its citizens is using a New Zealand trust structure for the purposes of tax evasion, it can make a request to IRD but IRD is unlikely to be able to help them based on the limited disclosure requirements. This is of particular concern given the implementation of the Common Reporting Standard from 2017, an OECD initiative providing for automatic exchange of information between signatories (most of the developed world).

    Secondly, while most NZ foreign trust providers will be subject to NZ’s anti-money laundering regime and the requirement to report “suspicious transactions”, lawyers and accountants are currently exempt from these rules. Many structures established for foreigners (with a NZ foreign trust as the ultimate holding vehicle) will include a complex web of companies further down the ownership chain that the NZ trustee may have little oversight over, as the assets in these trusts are never held directly at trust level for risk and liability purposes. So it is in this way that I think it’s only a matter of time before there’s another big story about them being used for things even worse than tax evasion…

    Comment by Expat — April 12, 2016 @ 9:21 am

  6. Danyl, what do you expect any politician to do? Would it be practicable to have every politicians liquid their assets? A blind trust may not be perfect but it’s the excepted practice and appears to work.

    With all these claims about Key I’d be interested to know if there was any MP who hadn’t got advice on tax from lawyers or accountants.

    Comment by NeilM — April 12, 2016 @ 9:40 am

  7. The NZ tax system is sufficiently biased towards wealthy asset holders that somebody like Key doesn’t really need a tax haven.

    If his assets are well chosen to deliver capital gains rather than income (beach houses, vineyards, etc) then his actual taxable income will be quite small. He’s allegedly worth $50mln, say he’s got 10% of that in income yielding assets giving him maybe 4% pre-tax, that’s $200k of declared income and a tax bill of $66k. I suspect he’d see that as a cheap price to be NZ PM – and indeed he’d still ahead on his world-leading $450k salary.

    Comment by richdrich — April 12, 2016 @ 9:45 am

  8. Well it seems the Witchfinder-General, the Cotton Mather of the Antipodes, is not involved. The perils of the tabloid blogger, eh Danyl? You, Patrick Gower and Duncan Garner should have a drink some time.

    Don’t be silly, Sammy. I have no problem with the consortium. It is a very good story and the story about the story may be the most interesting one of all. So far the NZ material seems pretty weak but I’m no expert in this area so I will see what happens along with everyone else. Perhaps there will be an explosive delayed release showing that a variety of NZ figures used the various facilities of true tax havens or perhaps not. That doesn’t change the fact that in NZ the affluent pay a share of tax disproportionate to their share of total income, so tax minimisation, avoidance or evasion is not very effective at the national level however effective it might be for individuals. I seem to remember threats of delayed release of the NZ material from the big Wikileaks dump of secret stuff stolen by Bradley Manning but there was nothing to see there and we all moved along.

    None of this changes the fact that I do find Nicky Hager an inherently ridiculous figure, entirely suitable to a Dickens novel but lacking only the perfect Dickensian name like Wackford Squeers, Paul Sweedlepipe or Mrs Jellyby.

    Comment by Tinakori — April 12, 2016 @ 9:52 am

  9. Some issues resonate and some don’t. Thanks for this little window on your world, Tinakori, one that is untroubled by any consideration of a moral compass.

    Comment by McNulty — April 12, 2016 @ 9:54 am

  10. @Tinakori,

    My god, a government that often listens to public opinion and/or waits to see if there is substance in an issue.

    National’s immediate response to the story was that “NZ is not a tax haven, we have the best system in the world, there are no problems with what we do whatsoever (oh – and Labour introduced the current rules!!!!)”. That’s not “a measured response to the issue du jour.” It’s a flat denial that there is any issue du jour to discuss.

    http://www.stuff.co.nz/business/industries/78531870/calls-mount-for-tighter-rules-on-nzs-foreign-trusts-after-malta-scandal-links

    Subsequently, we see a lot of people with actual knowledge of the industry speaking up and saying “actually, NZ is something of a ‘haven’ for offshore wealth because we don’t really require much disclosure of just whose wealth it is”. See, e.g., insider’s contribution at 5 above.

    So when, a week or so later, National suddenly thinks they need to bring in an “expert” to look at the current rules and see if they are adequate, we’re entitled to query the initial flat denial of any possible problems at all. They start to look less like a reasonable and sober assessment of the situation and more like a knee-jerk, slightly panicky, desire to kill the issue before it can get any traction at all … irrespective of its “substance”. Which may be good politics, but not great governance.

    Comment by Flashing Light — April 12, 2016 @ 10:02 am

  11. The allegation NZ is a tax haven is rubbish.

    A tax haven is a country the specifically sets out to allow people to avoid tax.

    The situation here in NZ is that some overseas people might be taking advantage of our trust taxation laws – set up to stop NZers avoiding tax.

    That’s an inadvertent consequence. I think it needs to be looked at and most probably changed but the current hysteria isn’t going to make the issues any clearer. But then I don’t suppose it’s intended to.

    Comment by NeilM — April 12, 2016 @ 10:11 am

  12. @Tinakori,

    Perhaps there will be an explosive delayed release showing that a variety of NZ figures used the various facilities of true tax havens or perhaps not.

    That’s not the issue we’re discussing, but nice redirect!

    That doesn’t change the fact that in NZ the affluent pay a share of tax disproportionate to their share of total income, so tax minimisation, avoidance or evasion is not very effective at the national level however effective it might be for individuals.

    It’s generally a good rule of thumb that when referencing the “perils of the tabloid blogger”, don’t then go rehashing tired Kiwiblog memes in your subsequent comments!
    https://dimpost.wordpress.com/2011/07/15/dpfs-graph/
    http://pundit.co.nz/content/tax-burdens-some-facts-for-a-change

    Comment by Flashing Light — April 12, 2016 @ 10:13 am

  13. @NeilM,

    A tax haven is a country the specifically sets out to allow people to avoid tax.

    Oh! OK, then. New Zealand is simply a haven for rich foreigners who wish to conceal their assets and income from their national governments (for whatever reason) whilst paying zero percent tax on them. That’s all OK then.

    Comment by Flashing Light — April 12, 2016 @ 10:17 am

  14. I think you need to read your own links FL. Even on Rob Salmond’s figures the top 10% receive 30% of the income and pay 43% of the net tax. Other variations on these calculations put the proportions differently and higher but lets go with the one you think most effective for your purposes. Frankly, your devastating counter arguments would be more effective of they were correct.

    Comment by Tinakori — April 12, 2016 @ 10:49 am

  15. I don’t think there’s any set response plan from Key to these sorts of things but if there was it might be something like:

    I’ll delay responding for a few days, let the opposition make it about my integrity and then swat then away like flies. Added bonus if Hager gets involved.

    Comment by NeilM — April 12, 2016 @ 11:08 am

  16. ‘ I do find Nicky Hager an inherently ridiculous figure’ Nuff said by the man without a mirror.

    Comment by paritutu — April 12, 2016 @ 11:18 am

  17. NeilM – I like the way you studiously ignore criticism of your silly positions by either addressing another point of discussion entirely, or go completely non sequitur / Oracle of Delphi.

    I can’t tell if it’s chutzpah or lotus-eating.

    Comment by Gregor W — April 12, 2016 @ 11:26 am

  18. “Frankly, your devastating counter arguments would be more effective of they were correct.”

    You mean correct as in not the “fib” (Salmond) nor the “lie” (various commenters to Salmond’s post) that was attributed to DPF in that Pundit post?

    Nice diversion though, from your original arsery.

    Comment by paritutu — April 12, 2016 @ 11:29 am

  19. If Hager does have a book on this, I hope he releases it well before (or after) the 2017 general. Labour and the Greens can’t afford a repeat of 2014.

    Comment by Alex — April 12, 2016 @ 12:48 pm

  20. Well Mr Key, if you’ve nothing to hide then you’ve nothing to fear by releasing your tax records.

    Comment by clintnelson — April 12, 2016 @ 1:23 pm

  21. The best bit about the near uniform repsonse to Hager from RW partisans, (aside from the lack of focus on the content), is that Hager, unlike his critics, has earned and maintained the trust of his sources.

    Over the years that includes not only politicians and the like but serving members of the SAS and intelligence services. I’m sure he gives a flying fuck what the likes of Tinakori reckon.

    Comment by Pascal's bookie — April 12, 2016 @ 1:41 pm

  22. Strange that the go to ‘tax expert’ was slammed by both Appeal court and Supreme court over his ‘expert testimony’ during the Penny & Hooper tax avoidance case.

    Shewan’s expert evidence in the case was set aside by both the Court of Appeal and Supreme Court because it strayed too far into commentary
    on the legal issues in the case, and earned counsel for the two Christchurch surgeons, Ian Penny and Gary Hooper, a rebuke from the Supreme Court”

    The rebuke from the Supreme court was because they included his no expert testimoney even though the CoA knocked it back
    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10747167

    We can be sure Shewan will find nothing and be careful not too look to hard

    Comment by dukeofurl — April 12, 2016 @ 2:34 pm

  23. There are parallels between John Shewan and Edward Troup (the current head of the UK tax department). Both men are well-connected insiders who can be relied upon to be gamekeepers in public, and poachers in private.

    http://www.theguardian.com/politics/2016/apr/11/edward-troup-advising-tax-havens-leading-hmrs-panama-papers-inquiry
    http://www.ibtimes.co.uk/panama-papers-hmrc-boss-edward-troup-was-partner-law-firm-that-represented-ian-camerons-1554123

    Comment by Kumara Republic (@kumararepublic) — April 12, 2016 @ 2:55 pm

  24. At bedtime my kids would delay, divert, deny before eventually giving into the inevitable. Their childish hope was maybe just maybe we would forget about bedtime. It seems that Key is child-like.
    By the way Key seemed to be pretty sulky in Question time today. Watch the down-curled lips.

    Comment by ianmac40 — April 12, 2016 @ 3:03 pm

  25. “I’m sure he gives a flying fuck what the likes of Tinakori reckon.”

    It would be even weirder if he did.

    Comment by Tinakori — April 12, 2016 @ 4:07 pm

  26. “Key’s trustees don’t liquidate his assets into cash and then reinvest them as soon as they’re signed over to them.”

    They probably didn’t, but they might, and they could, and he wouldn’t know. After eight years of blind trust management there’s a reasonable chance that even given asset he holds might no longer be there.

    Comment by Ortvin Sarapuu — April 12, 2016 @ 4:45 pm

  27. WTF. http://www.radionz.co.nz/news/political/301316/pm-has-deposit-in-foreign-trusts-firm

    Does this mean that a person living in NZ who happens to be PM is using a foreign lawyer to operate a trust in NZ for him so he can avoid tax in the country he lives in?

    Comment by Myles T — April 12, 2016 @ 6:08 pm

  28. I doubt it means anything.

    Still, I’d rather work that out for myself than have the Prime Minister’s press secretary Corin Dann repeat it for me three times on the news tonight.

    Comment by sammy 3.0 — April 12, 2016 @ 6:17 pm

  29. I doubt it means anything.

    Key paying his legal bill. If one were a conspiracy theorist you’d think he does this sort of thing on purpose to generate the predictable response.

    Comment by NeilM — April 12, 2016 @ 6:46 pm

  30. “in NZ the affluent pay a share of tax disproportionate to their share of total income”

    but not to their wealth

    Comment by Sacha — April 12, 2016 @ 7:11 pm

  31. “It would be even weirder if he did.”

    Yeah, probably. But the point remains that for a witchfinder general from a Dickens novel, serious people trust him with serious stuff. But sneer away mate. SAS people are just chumps right, to trust such and obvious fool.

    Comment by Pascal's bookie — April 12, 2016 @ 7:35 pm

  32. So many opposition MPs have family trusts and even Kevin Hague had rental properties.

    Not surprising then there’s no enthusiasm from anyone else to follow Little and release (selective) tax documents.

    Comment by NeilM — April 12, 2016 @ 9:41 pm

  33. “…partly helping people avoid tax (the traditional picture) but also helping all sorts of people and companies keep their business and crimes secret.”

    I guess I’m naive and idealistic but for me ‘avoiding’ tax is not paying your fair share and therefore should be illegal.

    I get that when it comes to your own tax you want to minimise it for brute selfish reasons, but when you look at it objectively you’re actually stealing from your own community.

    Comment by Myles T — April 12, 2016 @ 11:13 pm

  34. Neil you are wrong on this.

    Andrew Little has tabled all his financial documentation in Parliament, going back to 2010 according to the Herald:

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11621361

    it also says that: “Mr Key’s [embarrassing disclosure] link to the firm does not indicate any wrongdoing. But the timing is unfortunate for the Prime Minister, coming as New Zealand’s foreign trusts and transparency are in the spotlight as a result of the Panama Papers document leak.”

    I for one don;t agree. Any hint of financial misdemeanour or any hint that a representative may be compromised by moneyed interests deserves full public scrutiny. How else are we supposed to trust them?

    Comment by leeharmanclark — April 13, 2016 @ 7:05 am

  35. Dim Post commenters discussing John key and tax

    Comment by Tinakori — April 13, 2016 @ 8:28 am

  36. Any hint of financial misdemeanour or any hint that a representative may be compromised by moneyed interests deserves full public scrutiny. How else are we supposed to trust them?

    When an elected representative’s rectum serves as a pulpit for the squeaky end of the DimPost commentariat, surely that’s a public good that more than mitigates any financial funny business.

    Comment by Joe W — April 13, 2016 @ 9:00 am

  37. Right blogs commenting on John Key and tax:

    Comment by Don 1 — April 13, 2016 @ 10:49 am

  38. But Tinakori, the punchline to that gag is that she did, in fact, turn out to be a witch. “It’s a fair cop…”

    Comment by Dr Foster — April 13, 2016 @ 11:09 am

  39. The thing about the top 10% , is that ‘income’ is a flexible term where you do your best to drive a bus through the deductions avilable. In Australia where they have been looking at top incomes in detail, a large group of those who have pre tax income as ‘millionaires’ when they do their tax returns they have such large deductions to below the tax threshold that no tax is payable.
    One of the biggest deductions is “managing your tax affairs” seemed so huge as to seem to be a tax avoidance method itself

    “But escaping tax cost the millionaires dearly. The same document shows 27 of the 56 claimed a combined $46.7 million for the “cost of managing tax affairs”, around $1.7 million each.

    And many of the wealthy did similiar

    “Another 2305 Australians earning between $100,000 and $500,000 succeeded in bringing their taxable incomes below the tax-free threshold in order to pay no tax. Between them they made $420 million. After deductions they lost a combined $38.2 million. They spent $47.9 million managing their tax affairs and lost $16.2 million negatively gearing.”

    http://www.theage.com.au/federal-politics/political-news/tax-stats-meet-the-56-millionaires-who-pay-next-to-nothing-20160321-gnndna.html

    Comment by dukeofurl — April 13, 2016 @ 11:21 am

  40. “Right blogs commenting on John Key and tax:”

    Ah, the great Naked Gun movies. Wonderful to watch with the kids. Good but not great riposte. Would have rated it better if you had been first out of the starting gates.

    I’m disappointed though that no-one has commented on the appearance of Danyl as the all wise Arthur, King of the Britons in the Monty Python clip

    Comment by Tinakori — April 13, 2016 @ 11:40 am

  41. Don 1: there’s also this…

    Comment by Kumara Republic — April 14, 2016 @ 3:16 am

  42. Labour’s attempted hatchet job on Shewan has predictably back-fired and embarrased not only themselves but John Campbell as well.

    It’s hard to say whether they were being dishonest or just don’t know what they’re talking about.

    And meanwhile Key announces changes to provisional tax – something which people will pay attention to and be popular.

    It’s not hard to see that’s this has been the pattern for a number of years and probably has something to do with current polling.

    Comment by NeilM — April 14, 2016 @ 12:05 pm

  43. Labour’s attempted hatchet job on Shewan has predictably back-fired and embarrased not only themselves but John Campbell as well.

    It “embarrased” John Campbell in that he got Shewan on to his show, asked him directly whether there was any truth to the claims, and then allowed him to explain at some length and in some detail why there wasn’t, you mean?

    Oh, that our media would be “embarrased” so spectacularly on a regular basis.

    Comment by Flashing Light — April 14, 2016 @ 12:58 pm

  44. In regards to the Aldgate Trust, it is claimed by Key that it is a blind trust and he doesn’t know what assets it holds. That may well be true, we have no reason to believe otherwise. In regards to the JP and BI Family Trust, of which Key is the Founder, he is also claimed by mainstream media to be a beneficiary of this trust. So why start a family trust, putting in your own money, and being a beneficiary of it? Normally you would start such a trust for your family and your children would be the beneficiaries but you would not be a beneficiary, you would merely be the Founder (the one putting up the initial money) and/or trustee/executor of such a family trust.

    Comment by Daniel Lang — April 14, 2016 @ 3:00 pm

  45. I’m really looking forward to seeing history enlightened by these releases aside from the flaws they put the spotlight on in terms of current tax law (the reality of it).

    Mossack Fonseca was used during by Allies the Iran crisis and in other incidents of similar historical significance.

    It’s little known, but communications passed through the New Zealand embassy in Manila during the hostage crisis. For those who are aware of that an other aspects of New Zealand’s involvement in those and other historical events it wasn’t then so surprising to learn of New Zealand agencies’ interest in Iran.

    Comment by Bruce — April 14, 2016 @ 8:44 pm


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