Tax dodgers beware
Another global leak of 13.4 million documents – dubbed the Paradise Papers when they were made public on Monday – is throwing further light on the tax avoidance schemes of the world’s super-rich. The papers reveal the extent to which extraordinarily wealthy individuals and organisations have been squireling funds away in offshore havens to avoid liabilities in their home countries. This, of course, is a time-honoured practice. However, the papers also shed light on the aggressive tax avoidance strategies of multinational companies, such as Nike and Apple.
They reveal business dealings which, on the face of it, deserve extra scrutiny. According to the International Consortium of Investigative Journalists (ICIJ), the Paradise Papers ‘‘show how deeply the offshore financial system is entangled with the overlapping worlds of political players, private wealth and corporate giants’’.
An example would be how Facebook and Twitter received substantial investments from Russian state institutions with close ties to Vladimir Putin. They were channelled through a business associate of Jared Kushner, Donald Trump’s son-inlaw.
More connections between the Russians and people close to Trump include substantial payments made by a firm owned by Putin’s son-in-law to US Commerce Secretary Wilbur Ross’ shipping group.
And while Canadian Prime Minister Justin Trudeau is trying to push through a tax reform agenda which is touted as making the system fairer, his chief fundraiser has been moving millions of dollars to offshore tax havens and reducing the monies paid to the Canadian treasury.
This may all seem a long way from New Zealand, but our culturally close neighbour the Cook Islands features in the Paradise Papers as one of the tax havens. The islands’ official website promotes the Cook Islands as ‘‘the world leader in formation of asset protection trusts, safeguarding the assets of high net worth clients’’.
The ICIJ is seeking assistance from New Zealand journalists to help identify information of particular relevance to our part of the world. Much of the activity detailed in the material is legal. Some of it may not be.
This movement of this money around the world is shrouded in secrecy, so is beyond the knowledge of tax authorities and thus their abilities to pursue it. This is where the investigative work of the ICIJ and others is illuminating and worthwhile.
In the May Budget, the previous National government brought in measures to combat tax rorts by multinational players that it said could net $250m over the next three years. On the campaign trail, Labour pledged to push even harder in a bid to recoup $600m during that time.
Tax avoiders should consider two things – in this data-rich and interconnected world, secrecy is by no means assured. And governments, rightly, are becoming less tolerant of those who abuse the privilege of great wealth to simply get wealthier.