28 Apr 2016

PM's private lawyer lobbied government on foreign trusts

7:46 pm on 28 April 2016

Prime Minister John Key's personal lawyer lobbied both him and the-then Revenue Minister not to change New Zealand's foreign trust rules, arguing it could cause "severe damage" to the industry.

But Mr Key says he personally had no involvement in the Inland Revenue Department (IRD)'s subsequent decision not to carry out such a review.

John Key during caucus run 1.03.16

Prime Minister John Key Photo: RNZ / Alexander Robertson

Foreign trusts, and New Zealand's rules, have been under the spotlight since the release of the so-called Panama Papers, which revealed how Panamanian law firm Mossack Fonseca orchestrated a worldwide web of companies designed to let people hide money and dodge taxes.

The Green Party says email exchanges over the past two years show the foreign trust industry used its influence with the government to stop Inland Revenue from clamping down on the sector.

View the documents obtained by the Greens under the OIA (PDF, 20.8MB)

The papers show someone from the Antipodes Trust Group wrote to then-Revenue Minister Todd McClay about proposed changes to the foreign trust regime in December 2014.

The Prime Minister's office has confirmed that person was Mr Key's lawyer Ken Whitney - he emailed Mr McClay saying Mr Key had told him there were no current plans for change.

An excerpt from the emails released to the Green Party under the OIA.

One of the emails released to the Green Party Photo: SUPPLIED

But Mr Key said Mr Whitney's comments, that he'd been told by him there were "no current plans for change", were Mr Whitney's interpretation of their conversation.

The day after Mr Whitney's email to Mr McClay, the minister's office contacted Inland Revenue to say the minister had "expressed some concern that one of the options that will be presented in the report to him before the end of the year would be a removal of the foreign trust regime".

Inland Revenue senior official Carmel Peters responded saying they would "bear this in mind in how we write the report".

A few weeks later, on 12 December 2014, Inland Revenue released its report on foreign trusts, in which it raised concerns about damage to New Zealand's reputation if there was a perception it was operating as a tax haven.

Over the next few months, Mr McClay met with the foreign trust representatives, who told him they were worried the government would "close the industry down" and that they did not want a review of foreign trust rules as it could "severely damage" the industry.

In May last year, the Revenue Minister communicated the government's intention not to review foreign trust rules to the industry representatives, saying no Inland Revenue officials were actively working on the issue.

Later that month, Ms Peters from Inland Revenue told her staff there would be no review of foreign trusts due to "wider government priorities".

Mr Key alluded to the email exchanges between Mr Whitney, other industry representatives, Mr McClay and Inland Revenue earlier this month while talking to reporters after a pre-budget speech.

At that time, however, he did not reveal the person who had approached him was his own long-time lawyer, Mr Whitney.

"One of the members of the tax, that group, the foreign trusts, asked me about it. I said I haven't got a clue what you're talking about, I don't think that's right that there are changes, but go and take it up with the minister.

"Subsequently there's miles of paperwork that shows all the stuff he did, I had no other involvement other than that - it happens every day to me, people come up to me all the time and say 'what about x or what about y?' and I say take it up with the relevant minister."

Greens push for more details

Greens co-leader James Shaw said the emails showed how "powerful vested interests can get the ear of the government", which would then change its plans to suit them.

"I want the Prime Minister to tell New Zealand whether he gave Mr Whitney an assurance that the foreign trusts industry would not be reformed and, if so, why he hasn't been upfront about the assurances he gave."

In a statement, a spokesperson for the Prime Minister said these were just more desperate claims from the Greens.

"Regarding whether the IRD should have continued to look into the issue of foreign trusts in 2013, as the Prime Minister has said, the minister's view at the time was that this would have required IRD to dedicate significant resources to an area which did not affect New Zealand's revenue base and other issues were deemed more important.

"Also, there is already an ongoing OECD work programme looking into ways to address the issue, which New Zealand is participating in."

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