Q + A
Episode 98
PETER DUNNE
Interviewed by Greg Boyed

GREG Revelations this week that a company set up by John Key’s lawyer lobbied the Government against changing the rules on foreign trusts. So we asked Revenue Minister Todd McClay for an interview, but he wasn’t available, nor was the Prime Minister. But former Revenue Minister Peter Dunne is, and he joins me now from Wellington. Good morning.

PETER Good morning.

GREG When you were in the job, if the IRD had concerns about this country’s international reputation, how seriously would you have taken that?

PETER Very seriously. And the way it works is that they report on a series of issues that are both current in the New Zealand tax environment or the international tax environment, and clearly the Government would be foolish not to take heed of that advice. I have to say that at the time I was minister, the big issue of concern that was just beginning to bubble related to the Googles and the big multinationals and the share of tax they were paying. The issue of foreign trusts was on the edges of that, but I didn’t receive any specific advice from the IRD at that time that they were a problem.

GREG Okay, let’s talk about the foreign trusts. We keep hearing, ‘It’s not illegal. It’s not illegal. It’s not a good look, though, and it must have damaged our international reputation?

PETER Well, I think that’s where the position has moved from the time that I was minister three years ago to the current. At that time, I don’t think there was a significant concern being expressed, and I note that was really after I left the role in late 2013 that the IRD first raised the issue as being one that’s of concern. And I think the issue comes down not so much to the trusts themselves, but to the perception that’s created about New Zealand being a potential tax haven. We’ve always argued long and hard against tax-haven status for other countries. I think it’s come as a bit of a shock to us that we might now be regarded in the same light ourselves.

GREG But surely it’s not even a case of ‘we might be regarded’. We just are. We are just finding out about it. We are a tax haven.

PETER I think that’s the point. As you say, we’re only just finding out about it. There’s much more information, I think, that needs to be discovered at this point, and I think the concern that’s being expressed is a legitimate one. But equally, I think it would be wrong to leap to the conclusion that therefore we are a significant tax haven, and there’s a whole lot of consequences that flow from it. I don’t want to see us get to that point, and I think that’s really what the concern is at present.

GREG I think I know the answer to this next question, but are there any benefits at all for New Zealand in having these companies park their money here?

PETER Well, at one level, I suppose the money’s parked here, therefore it’s available to be used here by the New Zealand economy. But beyond that, there’s not really much benefit. Now, what normally happens in these types of situations is that countries that attract foreign investment or attract these sorts of interests gain a reputational benefit from it. I think in this case, the reputational side is actually a negative, rather than a positive.

GREG What happens when we find out, and surely this is just a matter of time, that we do find out that one of the companies who’s putting the money here is not a reputable company; it’s not a nice bunch of people at all?

PETER Well, I think that’s the issue we’ve got to be wary of. We don’t know that for certain at this stage, but I think it’s, as you say, likely that there will be revelations that won’t be positive. And New Zealand then has to work out what it does about these sorts of situations. But the point is that this is not just occurring in New Zealand. This is a worldwide phenomenon, and the notion that we can take arbitrary action here that somehow pulls up the ramparts and stops this sort of activity occurring in this country is simply foolish and false. So what we need to be doing is working alongside like-minded countries in the OECD and elsewhere to get good rules about international taxation, firstly of multinationals, and secondly of the treatment of these trusts. Because all that will happen if we try and pretend we’re separate from it, is the problem just simply manifests itself in other ways somewhere else.

GREG Now, we’re not alone in that aspect. Having said that, we do have an almost squeaky clean image internationally. How damaging is this going to be?

PETER Well, I don’t think it’s damaging yet, but I think it’s got the potential to become very damaging if we’re not seen to be acting in concert with other countries to do something about it. And that’s why when I was minister and the issue was starting to bubble in terms of the multinationals, the successive ministers and the current Government has always taken the view we need to be acting with our international partners through organisations like the OECD, where New Zealand’s always had a high profile, to make sure we get a good, robust international set of rules that can be applied universally. Otherwise we end up in a position where we look either that we’re not serious or that we’re putting in place a series of responses that simply aren’t going to work.

GREG Okay, so how could this play out? How could this damage us? Would you see if it did go the wrong way down the road, companies not wanting to invest here? Legitimate companies that aren’t using this as a tax haven?

PETER To put it bluntly, if the label ‘tax haven’ is being bandied about now as it is, sticks, then that’s extremely damaging. You think of the way we perceive other countries that we’ve historically labelled as tax havens. We don’t view them credibly, and I think that’s the big risk to New Zealand. As you said, we’ve had a very good reputation for a long period of time for a very robust, very transparent and a very open tax system – good rules, a clear guidance, etc. That is being potentially misused in these situations, and I think what we’ve got to get to the bottom of is the extent of the activity, what the profile of people using these trusts is, what the implications are for our reputation, and how we work in concert with other countries to make sure, as I say, a robust international system can be developed to combat them.

GREG All right, Peter Dunne, thank you very much for your time.

ENDS

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