Foreign trusts should've been a Labour Shewan

11:23 am on 15 April 2016

Power Play - Prime Minister John Key was potentially on the ropes this week over foreign trusts, but the Labour Party blew it with a ham-fisted attempt to discredit the man appointed to review foreign trusts rules.

The Panama Papers burst onto the international media scene last week, leaving some world leaders having to answer serious questions in its wake.

New Zealand has also been caught up, with several references suggesting this country is being used by wealthy foreigners to dodge tax.

Andrew Little during caucus run 1.03.16

Labour leader Andrew Little Photo: RNZ / Alexander Robertson

There was the inevitable call for the government to look at the rules, followed by the obligatory response of appointing a tax expert, John Shewan, to carry out a review.

Stories involving expenses, donations and, in this case, personal finances, inevitably draw attention back to elected representatives.

Questions to politicians about connections to trusts and their tax arrangements are perfectly legitimate, both for transparency and in the context of often self-righteous rhetoric about people, rich and poor, having to pay "their fair share".

RNZ contacted all 121 Members of Parliament asking them if they have, or have ever had, any connection to a trust registered in a country other than New Zealand.

The rationale is that if they have a trust registered here any income is automatically taxed, but if they have a trust registered in another country that might not be the case.

MPs have to declare any interest in trusts in the Pecuniary Register of Interests, but the declaration does not differentiate whether that trust is registered in New Zealand, or elsewhere.

Responses from the MPs who answered ranged from a straightforward "no", to bemused, to defensive - and, in the case of New Zealand First leader Winston Peters, outraged.

Of the 121 MPs contacted, 12* have not responded - all of them National Party backbenchers. Two other MPs, Labour's Jenny Salesa and Sue Moroney, were overseas and not available to comment.

National's Andrew Bayly wins the prize for "Best Excuse For Being Unavailable to Answer Questions About Foreign Trusts". He is skiing across the Arctic to the North Pole with his son.

Only two MPs declared any connection to a foreign trust; National's Paul Foster-Bell, who is a trustee for the Commonwealth Parliamentary Association, and Green MP Mojo Mathers.

She is a beneficiary of the Lamledra family trust based in the United Kingdom, which allows her to holiday in the family home on the coast of Cornwall, with no other benefit.

Ms Mathers hastens to add she has only been able to stay there for a week since being elected to Parliament.

As the Prime Minister, John Key could expect to come under a greater degree of scrutiny, and very early on declared no interest or connection to any foreign trusts.

A surprise gift and a tangent

Then, with the release of the latest pecuniary register, a surprise addition with Mr Key declaring a short-term deposit with a firm specialising in foreign trusts; a company that talks up the benefits of New Zealand's "tax-neutral" environment and disclosure regime as being conducive to "carefully managing the inter-generational transfer of wealth" - exactly the type of arrangements the government has agreed to review.

Mr Key mounted a "nothing to see here" response.

John Key talking about GCSB / SIS Report at bridge run.

Prime Minister John Key Photo: RNZ / Alexander Robertson

His long-time lawyer moved firms and took the deposit, that now sits in a bank account, to his new company Antipodes Trust Group Limited, Mr Key said.

Nothing illegal, nothing unethical, but a gift to the opposition nonetheless, which could have used the mid-week question time to link Mr Key with foreign trusts, even in a superficial way.

Instead, Labour went off on a tangent with the following lengthy narrative; the man appointed to carry out the tax review, John Shewan, had been sent to the Bahamas (along with former politician Don Brash) in 2014 to advise that government on introducing GST.

In the end, Labour argued, their advice was aimed at helping the Bahamas preserve its status as a tax haven, raising questions about the suitability of Mr Shewan to carry out the review of foreign trusts and therefore Mr Key's judgement in appointing him.

Its evidence? One line containing the opinion of a reporter who wrote a story at the time for the Bahamas newspaper, The Tribune.

Adjunct Professor at Victoria University, John Shewan, believes tax challanges posed by the digital economy can’t be played down.

John Shewan Photo: SUPPLIED

As well as pursuing a dubious and confusing line of attack against both Mr Shewan and Mr Key, Labour diverted attention away from the Antipodes Trust story, which it should have tried to exploit to the fullest.

It also raises questions about impugning the reputation of political "civilians", and whether they should be collateral damage in such debates.

At the start of the week, Labour leader Andrew Little talked about focusing on the important issues New Zealanders care about - after a poll showed his party at 28 percent - and the need for his caucus to lift its game.

The Bahamas story was an own goal, and one which has left Labour effectively sidelined this week when the government could have expected to come under real pressure.

*MPs who did not respond to questions about overseas trusts were Tim McIndoe, Joanne Hayes, Alfred Ngaro, Maurice Williamson, David Bennett, Mark Mitchell, Scott Simpson, Parmjeet Parmer, Chris Bishop, Tutehounuku Korako, Matt Doocey and Shane Reti.

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