Tax avoiders profit while profitable companies outlawed

Thursday, 7 April 2016, 12:58 pm
Press Release: Public Good

Criminals and tax avoiders profit while profitable companies outlawed

The publication of news stories from the “Panama Papers”, co-ordinated through the International Consortium of Investigative Journalists (ICIJ), are likely to continue over the days and weeks to come. It is reported that a full list of the names and companies involved will be released in early May and the Suddeutsche Zeitung has indicated that there will be more stories about foreign trust account users in the US and other countries. The more than 11 million documents show that “heads of state, criminals and celebrities are using secret hideaways in tax havens including New Zealand".

New Zealand’s problem is well known. Transparency International's 2013 National Integrity System Analysis said specifically "An overly permissive regime for company incorporation has allowed “shell companies” involved in questionable activities to incorporate in New Zealand. An IRD report of 2013 came to the same conclusion. NZ has lately become a haven for channelling the money of tax avoiders and the profits of criminals just as readily as the well-known tax havens like the Channel Islands or Panama.

The Transparency International report recommended amongst other things "establishing registers that record the owners or beneficiaries of companies and trusts" Meanwhile in 2014 the government committed to a response to the TINZ National Integrity System's report's recommendations as part of the Open Government Partnership Action Plan 2014-16. Almost two years later NOTHING has happened to achieve this.

It gets worse though. Firstly in a paper on emergent themes for the next iteration of New Zealand's Open Government Partnership Action Plan (2016-18) this important issue of a response to Transparency International's report (and with it the possibility of more open foreign investment transparency) has fallen off the agenda without ever being discussed. With the Prime Minister arguing strongly that there is no problem, as he has in Parliament, foreign "blind" trusts, and other important aspects of open government have fallen off the government’s radar. No matter, it seems, the cost to our international reputation for integrity.

Secondly New Zealand owned financial institutions and businesses which were well run, open and transparent have had to be closed down or subsumed into larger, sometimes overseas owned companies because top heavy regulatory overheads meant that they couldn't meet the government's new regime. Examples are the ethical investment company Prometheus*, a number of friendly societies and locally owned and run superannuation schemes like the Independent Retirement Plan as well as the prediction & trading website I-Predict.

The contrast could hardly be more ridiculous. Well run companies, that paid their taxes in full, are forced to close or amalgamate for reasons of “probity” while all the time NZ is enabling some of world's worst tax-avoiders as well as criminals and their loot. Meanwhile government commitments to greater openness are rolled back and, despite the evidence and the prior commitments, the Prime Minister denies that a problem exists.

Reference

*The PWC position statement for Prometheus shows it was trading profitably and repaid 100% of funds to investors.

ENDS

© Scoop Media

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