Needless to say, having its Prime Minister, a very money-minded, former Merrill Lynch senior executive, brought into the global spotlight so spectacularly, has caused quite a stir in this little picnic spot beside the global highway. Mr Key, quite rightly argued that John Doe had missed his target in placing responsibility for the Cook Islands’ tax haven at New Zealand’s door. The Cooks happen to use the NZ dollar as their currency, but enjoy full sovereignty in all other respects. Their banking and tax legislation is entirely the domain of their own legislative procedures.
However, in New Zealand, John Doe’s manifesto had opened the lid of Pandora’s Box. Huge media interest was aroused even before the ICIJ’s (International Coalition of Investigative Journalists) scheduled release, of the full searchable database, which had been handed over to their investigation a year, or so, previously.https://offshoreleaks.icij.org/
New Zealand, more due to its international image of warm-fuzzy, Hobbit–like innocence and virtue, than to any notable laxity of its legislation, had clearly caught the attention of Mossack Fonseca executives, who since around 2014, had been sending increasing numbers of clients to set up trusts in this country. (About 200 trusts in NZ, as against the total of around 15,000 ‘paper companies’ mentioned in the database as having been initiated by Mossack Fonseca globally.)
Fixated on these 200 odd companies, the political debate in New Zealand rages on. The majority of the protagonists appearing to believe that, or at least behave as though, those mentioned in the Panama Papers are the only companies hiding beneath New Zealand’s petticoats.
In fact, Mossack Fonseca doesn’t even merit a place among the top ten offshore legal service providers.https://en.wikipedia.org/wiki/Offshore_magic_circle
If Mossack Fonseca had spotted the advantages of New Zealand as a hiding hole for secret money, one can be certain that some, or all, of the top ten listed players would also be directing their dodgy clients to New Zealand. This business must be worth a considerable sum in foreign earnings by New Zealand-based legal, accountancy and banking firms.
The latter, are all professionals, well-heeled enough to contribute to a government’s re-election funds and thus, particularly well-placed to lobby the government for the protection of their interests. A Prime Minister, such as multi-millionaire Mr Key, with his neo-liberal inclinations and global banking background, could be expected to lend a more than sympathetic ear to such pleas.
In my ‘Panama Papers I’ blog, I demonstrated just how such offshore funds, by means of discretionary trusts to which the actual owner can disavow all ownership, could be used to conceal individual wealth. Such concealment must be especially advantageous to those in positions calling for the maintenance of an image of public probity and who might wish to ally themselves with the proverbial man-in-the-street. Pleas calling for the preservation of such mechanisms should not find it that difficult to gain traction in the halls of power.
Indeed, the success of one such lobbyist, John Key’s private legal advisor, would appear to be the silver spoon stirring the storm currently raging within the New Zealand tea cup. The rights and wrongs of this particular instance, is not the concern of this blog.
What doesn’t yet seem to have emerged in the NZ media, is the reality of its Prime Minister’s gallant attempt to protect the national interest in the face of the baying news-hounds.
John Key’s publicly proclaimed intent as Prime Minister and one generally endorsed by the population, is to protect and enhance New Zealand’s ability to earn foreign currency. The global offshore banking sector is huge – beyond belief. A best estimate is that $21 trillion is concealed away from the tax-jurisdictions in which it would otherwise be lodged. This is an annual equivalent in avoided tax, of all international aid expenditure to developing and disaster struck countries. https://www.forbes.com/sites/frederickallen/2012/07/23/super-rich-hide-21-trillion-offshore-study-says/#39b3013473d3 (USA GDP in 2015, was $18 trillion: NZ’s is $185 billion.)
The suckers being had, are those, who have to pay those taxes to support their governments, which both the ‘legal’ avoiders and their blatantly corrupt and criminal fellow travellers have managed to avoid.
By listening to the lobbyists for New Zealand’s offshore banking sector, John Key is doing what he sees as his duty to the country – and getting scant praise for it. He is fighting off his attackers with one arm tied behind his back. He could never, in his defence, make public the scale of the robbery being conducted by international tax avoiders and criminals against the vast majority of the world’s citizens, without damaging the NZ economy he is tasked to protect.
Were John Key to make such revelations public, he would be annoying multiple government leaders in a similar position to his own. The whole multi-trillion dollar international scam is allowed to continue more or less unmolested, not just because individual politicians and lobby groups are actively exploiting the system for their personal benefit, but also because their countries and many of those professionals, who actually do pay taxes in those countries, are making a handsome income from administering it. Unless all countries agreed to act simultaneously to close down this economic sector, which is so harmful to the global community’s welfare, the first movers would simply hand over the business they were doing to the late, or non-movers, who would then reap all the additional benefit.
And that is exactly what is happening!
Ever since 9/11, with a claimed intention of preventing the funding of terrorism (and simultaneously the avoidance of tax by US citizens) the USA has been exerting increasing pressure on other governments, particularly those viewed as tax-havens, to dilute their secrecy provisions and thereby reduce their attractiveness as destinations for tainted wealth. Consequently, and with increasing speed, the distribution of ‘tax-haven’ wealth between jurisdictions has changed considerably.
This international movement to restrict offshore banking took a major step forward with a 2014 OECD agreement.https://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11196423/51-countries-sign-up-to-share-tax-data.html
– check out the list of participating countries at the bottom of this Daily Telegraph piece. They include many of the long established Tax havens, such as the Isle of Man, Jersey, Guernsey, Switzerland, the Cayman Islands, the Cook Islands and all the world’s major nations. Conspicuous by their absence from the agreement are Panama, Russia (where no one would trust their money) and the USA (where everyone would be happy to place their money) especially if it could be done in secret and tax-free.
Welcome to the USA tax haven, which is rapidly scooping the pool and calling in the chips from all those lesser nations with offshore banking pretensions, who were suckered into going along with the scam. Or at least that is how an outsider could interpret recent and current events.
Here is an anti-American author, who believes this was done with malicious aforethought.https://nsnbc.me/2016/05/09/from-golden-dollar-to-petro-dollar-to-narco-dollar/
Here is perhaps, a more balanced view, which argues that the same (and for the USA, extremely convenient) effect, has been achieved – by accident! https://www.politico.com/magazine/story/2016/04/panama-papers-america-tax-haven-213800
Whatever the truth, and based on the arguments in my Panama Papers II blog, one cannot help suspecting that Panama was chosen to be victim of the hack, as it was one of the last significant, off-shore tax-havens left standing and still able to compete effectively with Dakota and other developing centres of the USA’s burgeoning, in-house, secret accounts, foreign money industry. That New Zealand was singled out by the elusive John Doe and ‘incidentally’ caught up in the scandal, would also have the effect of nipping that potential, minor competitor in the bud.
I was beginning to feel almost sorry for John Key as he struggled to keep New Zealand’s offshore foreign earnings sector alive in the face of this stab in the back from somewhere within the ranks of his much pandered to American ally. Having just expended so much political capital in supporting America’s ‘let’s contain China’ mission by dragging a reluctant New Zealand into the TPPA, this new politically damaging event must have been particularly galling. At the same time, he had to face a far more obvious onslaught from the NZ media and opposition politicians, who appeared not to understand the bigger picture and to whom he couldn’t openly admit what he was trying to achieve on behalf of the nation (and incidentally, no doubt, the preservation of his personal multi-million fortune.).
However, any vague sympathy I might have felt, quickly evaporated. During a parliamentary debate, the Prime Minister used the fact that Greenpeace had been named as a beneficiary of one of Mossack Fonseca’s shell companies, to further his case that there was nothing inherently sinister about offshore banking. In so doing, by deliberately embarrassing a global environmental campaigning charity, he confirmed his deep-seated dislike and contempt for organisations opposed to the neo-liberal money gluttons engaged in gobbling up the futures of our children.
This disregard finds its other expression in his government’s spectacularly feeble environmental and climate change policies. Perhaps Mr Key is another of the super-rich fraternity, who believe that their personal wealth accumulated during this era, in which the fate of the Earth is being decided, will suffice to protect their own children and grandchildren from the effects of the climate disasters awaiting the descendants of the less fortunate.
More to the point, in his quoting Greenpeace as a named beneficiary of an offshore trust, Mr Key was cynically and knowingly attempting to deceive the New Zealand public. He, of all people would be aware that being named as the beneficiary of an offshore discretionary trust does not require the consent, or even notification, of the party named as beneficiary. In the accepted rules of the discretionary trust game, it is perfectly normal for the named beneficiaries to receive no benefits from the trusts with which they have no inkling that they are in any way associated. That was a cheap and shameful move by New Zealand’s Prime Minister. https://youtu.be/u7wjGyiAUOM