Switzerland of the South: The Kim Dotcom Defence

Key’s Vision: Switzerland of the South

In the Weekend Herald of March 26 Fran o’Sullivan wrote about John Key’s Vision for New Zealand. She is known to be comfortable with the present neoliberal economic system. She is close enough to give us valuable insight into the thinking and machinations of the Prime Minister. If he, an ex-bankster, thinks of Switzerland as a favoured destination for the rich he does not think of the Matterhorn or Swiss cheese and watches. He thinks of banking and taxes. He starts by talking about terrorism and global instability making New Zealand more attractive as a safe haven for the mega rich. We New Zealanders can make a living pouring their coffees, washing their luxury cars and shining their shoes. But O’Sullivan comes to the point :

One of Switzerland’s attractions is its taxation environment and its strict secrecy laws, which until recently have enabled rich people’s investments to be squirrelled away in its banks, safe from the reprisals of revenue officials.
New Zealand does not compete on that score. But it is notable that one of the reasons why New Zealand has yet to follow Australia and bring in rigorous laws to clamp down on multinationals which are not paying significant tax here is because this country is competing for investment.
Key won’t be doing anything to destroy that wealth effect.

In other words our government tries to attract “investments” by deliberately keeping very relaxed rules and next to no oversight.

From Switzerland to Panama

Then the story about the Panama papers broke. Over 11 million documents from Mossack Fonseca were leaked. They are one of Panama’s law firms specialising in setting up legal structures for rich people to hide their assets. A team of international investigative journalists has been working on this treasure trove for over a year.

O’Sullivan was wrong about “New Zealand does not compete on that (strict secrecy laws) score“. We are labelled a tax haven and find ourselves in the company of other British tax haven outposts like the Bahamas, the British Virgin and Channel Islands and the Cook Islands.


Thousands of documents indicate that New Zealand foreign trusts are one of the favourite tools to avoid detection. Everything is foreign other than registration of the trust in New Zealand with a domiciled trustee normally a lawyer or accountant for hire. And this is not only about tax but money laundering, arms and drug dealing, terrorism and all sorts of activities you would want to hide.

An investigative journalists working for years on tax avoidance summed up on RNZ the one attraction these tax haven structures have in commonword: Secrecy.

Moral outrage over the “tax haven” label

The opposition and media worked themselves into a froth about the fact that New Zealand is recognised by international tax (avoidance) experts as a favourite tax haven. It it has not (yet) incurred the attention and wrath of the international community.

Hamish Fletcher’s article In the NZ Herald of April 9 was aptly titled “A stain on our name“. The Green Party’s James Shaw said that New Zealand is building a reputation as a sunny place for shady people. The Prime Minister after a weeklong delay finally announced an “independent” investigation into New Zealand’s foreign trusts. The opposition’s Winston Peters criticised his choice of expert who’s lifelong career was helping his clients to minimised their tax exposure. He is concerned that this appointee might have all the technical legal expertise of a poacher made game keeper but lacks the understanding of the moral and ethical issues.

guy body editorial cartoon april 11 2016 panama papers tax haven

Guy Body editorial cartoon April 11 2016 on Panama papers

This moralistic approach seems to be misguided. The voters supporting our neoliberal government don’t expect rich people to behave ethically. They have the rather cynical view that the rich don’t have morals and that is why they got rich.

The people should not be distracted by the morality of the issues. They should not cynically accept that there is always one law for the rich (1%) and another law for the rest of us (99%).

First, it does not have to be that way. We can change it.

Second, if the rich around the world would pay their fair share of taxes as the rest of us do we would globally according to the Guardian have yearly $200 billion more in the governments’ coffers. We would have free education, no more hospital waiting lists, no child poverty and ill health and so on. The benefits for society would be immense and across all sectors. We all would be better off.

These hard financial facts are what we, the media and politicians should be focussing on. Never forget the damage done by the rich we are enabling and assisting with our foreign trusts.

On planet Key

For Prime Minister Key any moral concern runs off like water of a ducks back. He just doesn’t get it. He is part of super rich 1% who are taking advantage of tax havens. He has spent all his professional life as a Merrill Lynch bankster without moral qualms helping his clients getting richer and helping himself along the way. How can that possibly be wrong. Many New Zealanders admire Key for being rich after growing up in a state house. He – as Donald Trump would say – is a “winner”.
After his initial reaction of just shrugging his shoulders it took him a week of polling to realise that the 99% don’t live on planet Key and that there is outrage out there.


This untypical serious disconnect with his voters will one day be John Key’s political downfall.
Still Key is not the least concerned about New Zealand’s reputation as a tax haven. That tax haven status is what he wants overseas rich people to know to bring their business here and create the desired “wealth effect”.

Of course every single government on earth will deny that they are a tax haven, which is as credible as Key’s denials.

The Kim Dotcom Defence

In a wonderful twist of irony and hypocrisy the prime minister is using the Kim Dotcom defence to justify New Zealand’s foreign trusts.

The file-sharing website Megaupload was used by millions to legally and legitimately upload and share files like family photos or business documents. Thousands also used it to share material, which was copyrighted by others. The US indicted Dotcom for copyright breaches and shut down his company’s business worth hundreds of millions of dollars.
He argued that he only provided a legitimate service/tool and had no knowledge or control over how it was used by every single user.

John Key uses the same argument defending New Zealand foreign trusts.
On Newstalk ZB on 11 April for instance “Ah, there are legitimate reasons to have a foreign trust in a country, and it could be all sorts of reasons. You believe you’re going to be persecuted, you just don’t trust the system you’re in, you believe there’s corruption in the system.” These are pathetic examples which would apply to just anybody in any country including New Zealand. Some of us might with good reason not trust our system believing there’s corruption in the system. According to Key lets all head for the hills of foreign trusts.

Key’s/Dotcom’s argument is that as long as there is legitimate use of the service it is ok.

There is one problem for Key however. This argument doesn’t work for him that well.

More than 99% of Megaupload’s millions of customers used the service for legitimate purposes.
For New Zealand’s foreign trusts the ratio will be the opposite. Less than 1 % will be using them for legitimate purposes.

Still our prime minister is one of the rich 1% with a background as a bankster and just appointed a ‘poacher as gamekeeper’ to report on the foreign trust system. Don’t hold your breath for any real change.

by  Dr. Hans B. Grueber

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