A year ago a political storm erupted over a company based in Panama and a huge release of potentially explosive papers. Their scope was vast. Their contents muddy. The Opposition parties were delighted – here was something that they thought could be smeared all over the Government.
A year on, how has the Government fared in the wake of the Mossack Fonseca affair? Surprisingly well it would seem, with most people having probably forgotten that this even happened. Despite having mud not of their own making getting smeared over them by the Government in one of their more desperate moments of defence, Amnesty International and Greenpeace seemed to quickly move along to more pressing concerns.
But what of the foreign trusts at the centre of the scandal?
At a first glance, the effect seems to have been dramatic. In an effort to shut down the Opposition attacks, which appeared to be gaining traction, the Government of then Prime Minister John Key had announced an inquiry into what had become known as the Panama Papers. In June 2016 the inquiry reported it had completed its work. The inquiry had found:
- New Zealand laws were not adequate for a country that prides itself on co-operating with other countries in deterring money laundering and other illegal activities
- Likelihood of detection of such illegal activities by authorities to be low
- Whilst no evidence was immediately obvious that illicit funds were being stored by foreign trusts in New Zealand it was reasonable to conclude that foreign trusts are being used in such a manner
John Shewan’s inquiry recommended tighter and more wide ranging disclosure rules, a registry that can be viewed by I.R.D. and a $500 annual fee be implemented. The Government agreed to implement most of the recommendations.
In April 2016 there were 11,645 known foreign trusts in New Zealand. When a deadline to file required information on their structure and activities expired last week, fewer than 3,000 had done so, meaning well over 8,000 trusts were no longer able to operate in New Zealand. 3,000 of these had said to Inland Revenue Department that they were not prepared to be subject to the tighter rules, thus rendering them ineligible to operate here. Another 5,000 had never made contact before the deadline expired, thus also rendering them ineligible.
Why? It depends on whom one talks to. Labour spokesperson Michael Wood believes that many of them could have been a legal front to hide money laundering and other illegal activities. Minister of Justice, Judith Collins on the other hand believes that it is wrong to think that the companies that moved out of New Zealand were engaged in illegal activities.
I believe that that a significant number, even if they were not necessarily engaged in illegal activities, would have known about or even in some capacity been an accessory to money laundering and aggressive tax activities. Because of this, I believe that a further deterrent of heavy penalties to both trusts and the people behind them should be established. This would be so that trusts that do set up in New Zealand know it does not pay to be an illegitimate operation.
Because after all, a 75% drop in registered foreign trusts I believe is rather telling.