Monday, 9 May 2016

"NZ absolutely, conclusively is a tax haven'

This has totally dominated NZ media this morning except for, as far as I can see the NZ Herald.

The Dom Post/Stuff has it) as does TVNZ

I put Nicky Hager’s interview on RNZ this morning ahead of everything else because he gives the clearest explanation of all (along with TVNZ’s Andrea Vance).

NZ IS a tax haven.

It does not fit the classic definition because it does not spare its own citizens who have to take the whole burden.

Corporations pay next to no tax. If they had to they’d be out of here ‘by lunchtime’

Meanwhile Key and his cronies have made the rules more lax to allow for foreign trusts (or shell companies) that allow the rich from other countries to avoid tax, to launder money and hide all sorts of criminal activities.

Key is into his elbows with this.

God knows what his personal role is, but I came across this document which lists companies that have the name John Phillip Key in them.
New Zealanders shrugged off corruption and dirty politics to vote this criminal back into power.

If they also show the same indifference to this (even though it affects their own pocketbook and the evidence is clear to see) then I wash my hands of this country’s inhabitants (most of them) and become an internal exile.

New Zealanders sleepwalk into fascism

Nicky Hager sheds light on the murky world of NZ as tax haven

NZ at heart of Panama money-go-round
EXCLUSIVE - Panama Papers NZ - New Zealand is at the heart of a tangled web of secretive shelf companies and obscure trusts being used by well-heeled South Americans to organise their private wealth, business affairs, and channel their funds around the world.

RNZ's Gyles Beckford, Patrick O'Meara, Jane Patterson, TVNZ's Lee Taylor, Jessica Mutch, Andrea Vance, & Nicky Hager

9 May, 2016

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Photo: RNZ / James Sandy

The extent of this country's involvement in the global money-go-round and intricate asset management and protection industry is showcased by more than 61,000 documents in the leak of papers from the Panamanian law firmMossack Fonseca - known as the Panama Papers.

The Consortium of Investigative Journalists and German newspaperSüddeutsche Zeitung gave RNZ, TVNZ, and investigative journalist Nicky Hager joint access to the papers. This is the first in a series of reports on what has been uncovered so far, after only a week with the data.

It is already clear that Mossack Fonseca ramped up its interest in using New Zealand as one of its new jurisdictions in 2013, along with Belize in Central America, offering extremely private, zero-tax foreign trusts.

The firm trumpeted New Zealand's top flight legal and financial reputation as "allowing for the speedy formation of appropriate mechanisms for wealth protection, inheritance and tax planning".

That's code for tax havens, and a Mossack Fonseca memo said 95 percent of the company's work consisted of "selling vehicles to avoid taxes".

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New Zealand - A haven in the South Seas. Photo: 123RF

Mossack Fonseca wasted no time setting up the local Auckland branch in December 2013 and from then on enthusiastically chased business, particularly from Mexico, but also from Uruguay, Chile, Brazil and Ecuador.

New Zealand's tax-free status, high levels of confidentiality, and legal security are seen as the virtues, but a common thread through Mossack Fonseca is the need to avoid any structure or involve people who will attract attention from our authorities.

Initially its business was done through an Auckland accountancy firm Staples Rodway, with the main contact being Roger Thompson.

But by mid-2014 Mr Thompson had left Staples Rodway and set up Bentleys Chartered Accountants, on the 13th floor of a Queen Street office tower. Bentleys is the registered office of Mossack Fonseca New Zealand, and Mr Thompson is one of its directors.

Who is Roger Thompson?

Co-founder of Bentleys New Zealand. Director of Mossack Fonseca's subsidiary in New Zealand, and Orion Trust (New Zealand), a trustee company for foreign trust and companies, including members of Malta's government.
Both Mossack Fonseca NZ and Orion Trust use Bentleys address at 205 Queen Street as their registered office.
Roger Thompson who leasds the taxation, trusts and corporate administration teams at Bentleys.Roger Thompson Photo: SUPPLIED / Bentleys

Mr Thompson has more than 30 years experience both as a chartered accountant and a lawyer.

His LinkedIn profile says he worked for Staples Rodway, where he also worked closely with Mossack Fonseca, before co-founding Bentleys in August 2014.

His resume also includes stints at Inland Revenue in the early 1980s, also Allan Hawkin's Equiticorp and law firm Kensington Swan.

How does it work?

The system is simple and mechanical.

A foreign investor looking to manage their affairs may be referred to Mossack Fonseca's home office in Panama by a private advisor, a bank or another Mossack Fonseca branch.

The firm routes the inquiry to its New Zealand branch, which looks at the options - perhaps a special tax free company, known as a look-through company, a trust, or a limited partnership.

And then it becomes a task for Bentleys and Mr Thompson and his staff to put into force.

But there's a similarity to many of the deals.

Mr Thompson is often the sole New Zealand director of the local companies alongside two Panamanian directors. A further Bentleys company, Orion Trust (New Zealand) Limited, is used over and over as a nominee office holder in foreign trusts and companies.

The trusts set up have anonymous names such as The Eden Trust, The Oslo Trust, The Milfington Trust and the Omicron Trust.

A character check of the original investor is done using a global search machine, while the investors provide a copy of their passport photo and details, and a utility bill such as a power or gas bill to confirm where the person lives. But these details rarely appear in the public documents.

Bentleys then sends a one page IRD 607 Foreign Trust Disclosure form to Inland Revenue once a year for each foreign trust, confirming no tax needs to be paid under New Zealand foreign trustee law.

The extent of Mr Thompson's links to the industry is shown by the more than 4500 Panama paper documents he's listed in, the 3500 mentions of Bentleys, and the more than 9000 mentions of the ubiquitous Orion Trust.

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Tax protection - the number of foreign trusts here has multiplied. Graphic: RNZ / James Sandy

But while Bentleys has a dominant role in the industry, similar deals and structures are being constructed by accountants and lawyers throughout the country.

Since the law changes in 2008 and the update in 2011 the number of foreign trusts has more than tripled to 10,697 this year from 3311 - according to Inland Revenue.

The clients

The Panama Papers cast light on the sorts of people using New Zealand.
Typical clients are an Ecuadorian banker, two Colombian car dealers (one New Zealand trust each), a Mexican film director, and wealthy Mexican society figures.
An Israeli man named Asaf Zanzuri, chief executive of the Balam Security company that sells security equipment to various Latin American governments is also in the Papers. In 2015 he negotiated a multi-million dollar contract to supply Dominator XP drones to the Mexican government for use "maintaining Mexico's internal security".

At the same time - February 2015 - Zanzuri used Mossack Fonseca NZ to establish a foreign trust in New Zealand called the Sapphire Trust. Another employee of Balam, Rodriguez Ruiz, also got Mossack Fonseca to set up the Diamond Trust in New Zealand.

Another client taking advantage of New Zealand's opaque structures was Carlos Dorado, the president of Italcambio - a Venezuelan bank. He and a Mexican lawyer, Luis Doporto, set up a New Zealand foreign trust called Abbotsford Trust, which was used in conjunction with a Dutch incorporated company Neuchatel Holdings to buy a Mexican pharmaceutical company.

The papers show a Brazilian mining engineer Bruno Lima looking to use New Zealand structures to run companies exporting chemicals banned in Brazil to Mexico. In the end he abandoned the idea and used the structure to import legal chemicals into Brazil.

And Mexico's unpredictable and uncertain inheritance laws, which can't guarantee family wealth goes to the right people, have been a rich source of business for Mossack Fonseca New Zealand and Bentleys.

Mexico City based Bald Eagle Services run by Michael del Vecchio is described as one of the local Mossack's office best customers, and has sent a steady stream of wealthy Mexicans to set up New Zealand trusts to protect their estates.

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Graphic: RNZ / James Sandy

And one of the more intriguing constructions was set up for a Russian-speaking, Spanish based electrical engineer, Jose Ramon Lopez Lombana.

He asked for four New Zealand companies and four New Zealand trusts to be established to deal with four Mexican companies, which pass money and fees from internet trading through New Zealand to a bank account in Prague in the Czech Republic.

The Panama Papers provide a paper trail of deals, but rarely divulge the reasons for the New Zealand trusts and companies or the assets at the centre of the transactions.

Safe haven or tax haven?

The Organisation for Economic Co-operation and Development (OECD), which leads the global fight against tax dodges and money laundering says there are four main characteristics of tax havens:
  • little or no tax on a company's income;
  • lack of transparency on the ownership and business of a company;
  • a company appears to do little or no business;
  • and no effective exchange of information between tax authorities.
The government has said New Zealand's adherence to the OECD guidelines, the double taxation and information sharing agreements with scores of countries, and the Inland Revenue's ability to seek information if need be, counter charges of New Zealand being a tax haven.

Roger Thompson rebutted any notion that the trusts and companies his company set up were used to dodge taxes, and said claims they were had been exaggerated.

"I don't see NZ is a tax haven. I would describe it as a high quality jurisdiction for trusts with a benign tax system in certain circumstances.

"I think the assumption that all NZ foreign trusts are being used for illegitimate purposes is unfounded and based largely on ignorance," he said in reply to written questions.

An Auckland University tax law professor Michael Littlewood has previously been in little doubt New Zealand is being used a tax haven.

"A workable definition ... is that a tax haven is any country that wilfully allows itself to be used as a means of avoiding other countries' taxes. By this definition, New Zealand is plainly a tax haven," he said in a study last month.

The government's response to the revelations to date has been to appoint a tax expert, former PwC chairman John Shewan to conduct an inquiry and make recommendations on the rules and disclosure conditions for the trusts and companies concerned in the industry.

Mr Shewan's appointment was put under the spotlight for a period, but he's since been left to get on with the job.

Prime Minister John Key said Inland Revenue would follow up any revelations from the Panama Papers involving New Zealand, but was rejecting calls for the industry to be shut down.

"It would be, I think be a dangerous decision to make as a knee-jerk reaction just to ban a foreign trust overnight, because we have very good tax rules, they're integrated rules and they're respected around the world."

He said New Zealand was working with other OECD countries to shut down tax loopholes, the next step in that co-operation comes this week with London Anti-Corruption Summit being hosted by British Prime Minister David Cameron, which Police Minister Judith Collins will attend.

*The investigation into New Zealand links in the Panama Papers is a journalistic collaboration by reporters from RNZ News, One News and investigative journalist Nicky Hager, and with the assistance of the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung.

The new Panama Papers revelations explained

Patrick O'Meara, Economics Correspondent
What are the Panama Papers and what do the latest revelations mean? Catch up on the latest developments in the saga with a special Q & A.
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What are the so-called Panama Papers?

The Panama Papers are an unprecedented leak of 11.5 million files from the database of the world's fourth biggest offshore law firm, Mossack Fonseca.

The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ).

The ICIJ then shared them with a number of partners worldwide, including RNZ, TVNZ and investigative journalist Nicky Hager.

What do they reveal?

The documents show how the world's rich exploited secretive offshore tax regimes, including New Zealand's.

This country is referenced more than 61,000 times in the papers, and shows Mossack Fonseca actively promoted New Zealand to its clients, particularly those from Latin America, as a place to park their money.

It highlighted New Zealand's tax-free status to foreigners setting up offshore trusts or companies and limited disclosure rules, backed by New Zealand's stable political system, and independent and established legal and financial systems.

A number of New Zealand key foreign trust players also show up time and time again, including Bentleys New Zealand and its co-founder Roger Thompson, which acted as Mossack Fonseca's agent here.

So New Zealand's a tax haven?

The OECD says tax havens have the following features; zero or low tax, a lack of effective exchange of information, lack of transparency and no substantial activities

The Panama Papers highlight the complexity and opaqueness of many trusts, and the lengths some people went to hide their connection to them.

Indeed, a Mossack Fonseca official, reported in the Guardian newspaper, said "95 percent of our work coincidentally consists on selling vehicles to avoid taxes."

How is it done?

The Panama Papers show it's relatively easy to do for those with the means to do so.

Potential customers, or their lawyer or accountant, would contact Mossack Fonseca. Typical clients include Ecudorian bankers, Colombian car dealers, wealthy Mexican celebrities and Brazilian lawyers.

Mossack Fonseca passed on their clients information to Auckland law firm Bentleys and its co-founder, Roger Thompson, who would organise the paperwork to set up the trust here.

Mr Thompson's tasks would also often include being the sole New Zealand director of the trusts, alongside two Panamanian directors.

A further Bentleys company, Orion Trust, is also used over and over as a nominee office holder in foreign trusts and companies.

Both hid the real owners from view.

Nevertheless, Bentley's Roger Thompson says confidentiality is allowed, and the system guarantees it.

Who keeps an eye on the trusts in New Zealand?

Inland Revenue (IRD) has oversight of the trusts, which are required to be registered. The trusts are not required to file an annual return, but if asked by IRD they must give details on their make up and transactions.

The papers indicate that IRD rarely queried or checked any trusts, its owners or its beneficiaries.

In the light of the Panama papers, is the government doing anything?

Prime Minister John Key initially insisted there was nothing wrong with the foreign trust regime when the papers first came out in early April.

But within a week, Mr Key executed a u-turn, appointing former PWC chair and tax expert John Shewan to carry out a review of the disclosure rules.
He is due to report back at the end of June.

Mr Key also said Inland Revenue will follow up any revelations from the Panama Papers involving New Zealand, but has rejected calls for the industry to be shut down.

He said New Zealand was working with other OECD countries to shut down tax loopholes.

The next step in that co-operation comes this week when British Prime Minister David Cameron hosts the London Anti-Corruption Summit, which Police Minister Judith Collins will attend.

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