New Zealand a clean tax haven?

Will Fitzgibbon of the International Consortium of Investigative Journalists says NZ is 'being harmed reputationally as a country' through its role in the world of offshore finance

New Zealand is something of a dark horse in the world of offshore finance with "very clear, intentional and excited" use of NZ as a clean tax haven evident, says Will Fitzgibbon who is a senior reporter at the International Consortium of Investigative Journalists (ICIJ).

Fitzgibbon, speaking to interest.co.nz during a visit to Auckland this week, says NZ "kind of came out of nowhere" on the ICIJ's work on the Panama Papers and Paradise Papers.

"We saw especially in the Panama Papers, but also in the Paradise Papers, very clear, intentional and excited use of New Zealand as a clean tax haven. And that's basically where New Zealand fits in. It's one of the dark horses in this dubious financial universe of tax havens precisely because it doesn't have the same reputational baggage that Panama does, for example," says Fitzgibbon. 

"So when we as journalists started seeing curious emails from businessmen in Venezuela, or from lawyers for Russian tycoons writing to and corresponding with accountants and lawyers and financial service companies in Auckland and Wellington or anywhere else, yeah, it took us by surprise and it only made us want to dig further."

"New Zealand wouldn't have been on my list for a place to look if I was interested in following some dirty Russian money, for example, and I think now that has completely changed. I think the New Zealand example was so unexpectedly perfect in how a country with a clean reputation who no one thought of beyond the Hobbit and the All Blacks could find itself right in the middle of corruption scandals at the heart of Europe and the heart of Latin America. But now we'd be foolish as journalists not to think about New Zealand the next time we stumble across some kind of financial scandal," Fitzgibbon says.

Reputational harm

Ultimately, he adds, NZ is "being harmed reputationally as a country" due to the activity exposed in the Panama Papers and Paradise Papers.

"Each time a corrupt politician in Europe, Latin America or Asia takes money out of his or her country and sends it through the convoluted offshore system including a trust or a company in New Zealand, each time a company avoids tax through these offshore structures, this money is going somewhere else and not being used in that country where it was generated. And that, I think, is what has motivated so many of us as journalists who have reported now on the offshore system for so long," says Fitzgibbon.

"This is not a victimless game. This is not a victimless sport in which if you're wealthy, if you can hire a lawyer, if you can hire an accountant, you're just innocently moving money around the world. I think that's the reason why we've seen such strong reactions to things like the Panama Papers and Paradise Papers' [It] is that society is increasingly realising that this is not some sort of victimless offshore shell game."

The Panama Papers investigation stemmed from a huge leak of documents from the Panamanian law firm Mossack Fonseca. This highlighted the use of NZ foreign trusts to hide assets for the likes of Malta's energy minister and the chief of staff for Malta's Prime Minister, the suspended speaker of Brazil's lower house of Congress, and the exiled former Prime Minister of Kazakhstan.This led to the Government tightening the rules overseeing foreign trusts. Additionally then-New Zealand Prime Minister John Key was the only politician directly named in a statement issued by the Panama Papers whistle-blower.

The Paradise Papers investigation stemmed from another massive leak, this time from offshore law firm Appleby, Singapore headquartered trust company Asiaciti and from company registries in 19 "secrecy" jurisdictions. Among other things the Paradise Papers revealed the offshore interests and activities of more than 120 politicians and world leaders, including Queen Elizabeth II, and 13 advisers, major donors and members of US President Donald Trump's administration, and exposed the tax engineering of more than 100 multinational corporations, including Apple, Nike and Botox-maker Allergan.

In addition to the misuse of NZ corporate structures as exposed by the ICIJ, the continued misuse of NZ's financial service providers' register, as highlighted by interest.co.nz on numerous occasions, and shell companies, continues to damage this country's reputation.

Fitzgibbon is keen to expose the role of the enablers of this activity, being accountants and lawyers, including those in NZ.

"My main message to them as an investigative journalist is don't be surprised if and when we come and ask questions again. Because based on what I've seen, based on what I continue to see, I'm not convinced that the industry of enablers, and I'm talking about the world's largest accounting firms, some of the world's biggest law firms, I'm not convinced that they recognise the extent to which a lot of their work is contested by not just journalists, but by members of the public and by members of political parties in governments across the world. So I think there will certainly be more stories written about them," says Fitzgibbon.

Fitzgibbon is also the ICIJ's Africa and Middle East partnership coordinator. He's an Australian based in Washington DC. Fitzgibbon visited Auckland to give a presentation at an anti-money laundering conference.

"Just as I was coming to Auckland for this talk tomorrow I was reading through some of the Paradise Papers documents. And there was one particular example about New Zealand. There was a lawyer from the law firm at the heart of the Paradise Papers, Appleby, who had been to New Zealand at some point on a business trip. And in this email he talks about the fact that, and I'm quoting loosely here but it's generally what he said, that there are accounting firms in New Zealand who have a heightened willingness to push the boundaries, was the quote in the email, of laws and of legislation. And to help clients reduce their tax bill or worse."

"And that really struck with me because it goes to show how intractable this offshore problem is. If we're not just talking about rogue operators, who once they're uncovered can be thrown in jail or have the book thrown at them pretty easily, if we're not just talking about them but we're instead talking about some of the biggest companies in the world, accounting firms who routinely receive government contracts, then I think it's going to be a lot harder to achieve lasting change. And it just means, I think, we're in a likely situation of seeing more of these scandals in the future," Fitzgibbon says.

In terms of the Panama Papers, he says nearly US$1 billion has now been recouped as a result of the investigation from many countries including NZ. 

"Inland Revenue gave us a figure a few weeks ago, around $600,000 that has been recouped in New Zealand from the Panama Papers," says Fitzgibbon.

Changing the debate

Additionally he says changing the debate around the use of the offshore finance system is something that has been important.

"If you're a corrupt oil minister and you've got the ability to steal a few million or billion dollars from your country's treasury, you're going to do your darnedest to find a way to do that. And unfortunately I think it's fair to say there will always be an offshore system somewhere that will be willing to help. But I take great comfort and pride out of the fact that now in many, many countries around the world, be it Malawi, or Peru or New Zealand or Japan, you have the taxi driver, you have the hair dresser with an increased knowledge of what the word 'offshore' means, and more importantly than that, what that means for social equality and inequality."

"Because the reason that I and lots of journalists report on tax havens in the offshore industry, is not because we have a deep seated love of reading complex spread sheets and complex annual reports, that is definitely not it. It's because fundamentally all of this offshore palaver results in a system in which there are parallel universes in existence. One for the average Joe like you and me who don't even think about calling up an offshore lawyer or an accountant and ask them to set up a company in Luxembourg, and the 1 or 2% of people who do, for whom that is their go to manoeuvre in life. They as a member of the elite have all these tools at their disposal that the rest of us don't. And I think continuing to report on that and exposing how those tools and the enablers help that happen, is a motivating passion of mine," says Fitzgibbon. (via Interest.co.nz)