Political roundup: War on wealth

Cars drive past the building housing the offices of the Mossack Fonseca law firm in Panama City. Photo / Bloomberg

The explosive revelations of the Panama paper leaks are resonating strongly around the world, largely because in a post-global financial crisis, ordinary people are angry at the rich elite. This is now playing out in New Zealand politics in a way that makes John Key and National vulnerable.

Yesterday I spoke with a member of the public who thought he may have uncovered damning evidence about the Prime Minister's financial dealings. He had been digging around in Hawaii's property purchases registry online, and found the deed of sale for John Key's $6m Maui apartment, which indicated the politician had only paid $10 for the property in early 2008 when he was Leader of the Opposition. Further investigation suggested that there was nothing sinister or corrupt about the transaction, and the trust arrangements document was part of longer process that squared up with how things are normally done.

The story nicely illustrates the heat of the new "war on wealth" that is going on at the political level both in New Zealand and globally. All politicians and elites are under suspicion, and increasingly their assets will be scrutinised and used against them. This is largely because we have entered a post-global financial crisis period when the wider public is especially sensitive to issues of economic inequality and notions of elites exploiting society.

National's vulnerability on wealth

The Prime Minister and National Government has handled the Panama papers controversy relatively poorly so far. And it's an issue they are incredibly vulnerable on, depending on how well the Opposition parties handle the opportunity.

For perhaps the strongest argument about the potency of this issue, see journalist (and John Key's biographer) John Roughan's column, They all should be paying a fair share. In this he explains how the wider public - including himself - are infuriated by the rich exploiting the system and "not paying their whack." He urges Andrew Little and the Labour Party to go hard on the issue, even if the topic of foreign trusts is "tedious and the technicalities don't make riveting politics." Roughan complains that National have done nothing about fixing such issues, and tax avoidance in general could give "the country a reason to change horses."

Of course, Labour has tried numerous times to impugn Key's reputation through connecting him with the mega-rich of the world and their various financial management mechanisms. In the past it hasn't worked, but Vernon Small suggests that it could be different this time around, especially since Key has been making mistakes on the issue: "But by appearing to side with the so-called "1 per cent" he handed a cudgel to his opponents to beat him with. It is the very characterisation of Key that they have tried - and struggled - to make stick; the rich former money trader whose sympathies rest with the world's big money and corporates to the detriment of the "battlers". Labour, the Greens and NZ First deserve credit for making Key look weak on an issue where he is, for once, clearly on the wrong side of public disquiet" - see: Panama Papers: New Zealand's trusted reputation demands changes to foreign trust rules.

Small suggests today that Key has done little to assuage public concerns about the trusts and New Zealand, and about Key's own connection to the industry - see: Ten days down the road on Panama papers and NZ is still stalled. According to Small, "the same questions are still begging to be answered", and there's a lingering perception that the PM "uses a firm that specialises in setting up foreign trusts and makes the very arguments for New Zealand's statutory regime that have drawn scrutiny - our tax rate and the level of secrecy we offer."

He also says that "Overall, Key has fumbled badly over the issue, starting with that tin-eared initial defence. It was simply not enough to say he did not hold a candle for these kinds of trusts. He also stumbled by not spotting in advance the media focus on his links with Antipodes. There also have to be questions about the wisdom of appointing Shewan."

Key's performance might not be enough in this era of anti-elites. As Joe Bennett cleverly writes, we are all quite delighted by the Panama Papers: "Absolutely. Me too. And hands up if you're keen for ever greater revelations of wrongdoing, greed and malpractice. Oh, we are siblings in schadenfreude" - see: Calling out all the brazen and brash cash stashers.

And there are plenty of other columnists railing against the easy ride that the multinationals and mega-rich apparently get in this country. For example, Heather du Plessis-Allan says "If ever you needed a truth test on the myth that New Zealand is an egalitarian country, this is it. We run two tax systems: one for most of us, another for people with money and power. Most of us have to pay tax.... And now this Government isn't going to stop rich foreigners using New Zealand as a tax haven. Instead, this Government is smiling and waving to tax-dodging celebrities on the other side of the world while it uses the Panama papers leak as some sort of international advert" - see: Tax for the goose and the gander.

It's not just Key's past as a money trader that could associate him with the mechanisms that the mega-rich use to escape taxes, but also his previous advocacy for New Zealand to become the "Jersey of the South Pacific". This was recorded in an interesting 2005 interview with Fran O'Sullivan - see: Key chases luck o' the Irish. And for an update on this, see Isaac Davison's Panama Papers: Key defends offshore banking comments.

Fran O'Sullivan also published - just prior to the Panama papers leak - another report on Key's latest ambitions for New Zealand to attract the wealthy - see: Key's vision - Switzerland south.

So why doesn't Key understand the strong public reaction to the Panama papers, or detect the new hostility to the mega-rich? According to Chris Trotter, alluding to Key's estimated fortune, "There are 55 million answers to that question. For a long time now John Key's fortune has dulled his otherwise acute political judgement" - see: Shrugging-Off The Panama Papers.

Trotter points to earlier statements and defences of wealth in New Zealand by Key, and argues that "In the light of this earlier demonstration of Key's deep belief in the superiority of the very rich; and in the very different measures that must be taken of their needs and deeds; should we really be surprised when he struggles to understand exactly what the persons exposed by the Panama Papers have done wrong? If you believed as strongly as John Key does that the very rich are better than you and me; and subject to a very different set of rules; then you would probably shrug-off the Panama Papers too."

The Government's overtly "relaxed" position could start to be seen as complacency, or worse. And so, if National is not careful, then columns such as Bryan Gould's hard-hitting Govt serving interests of the rich might start to resonate much more widely.

Key out sync with opinion leaders

John Key has been very clear in his judgement that New Zealand is not a tax haven. But plenty of editorials, commentators, and experts disagree with him. For the most colourful survey of the expert dissidents, see Toby Manhire & Toby Morris' The Panama Papers, NZ and 'tax haven' ridiculousness. Similarly, see Hamish Fletcher's Leak leaves stain on New Zealand's name.

Shamubeel Eaqub has a hard-hitting analysis of the issue in his column, Panama Papers show NZ is complicit in criminal behaviour. Eaqub gives National a black mark for its reaction to the controversy: "It is no good pretending some moral high ground and aloofness from corruption as a country. The Panama files show that New Zealand is complicit in shady, dishonest and criminal behaviour. Our reaction should be to urgently stop this from happening, not deny there is a problem."

Transparency International New Zealand is also calling the revelations a "huge blow" to the country's low-corruption status - see Dan Satherley's Panama Papers called 'huge blow' to NZ's reputation.

And some commentators are even calling for the trust regime to be abolished - see Larry Williams' Govt must close down offshore trust rort.

Newspaper editorials seem to be running strongly against National on the issue. After Key first reacted to the Panama papers leak, the New Zealand Herald argued that his position was likely to become "increasingly indefensible" - see: PM on shaky ground over weak tax rules. The newspaper also said: "Key might feel immune from the mounting international clamour against the activities of the super-wealthy, but the fact remains that the exploitation of loopholes is often at the expense of ordinary taxpayers because it deprives the public accounts of revenue to invest in education, health and social services."

The Herald subsequently ran another editorial complaining that "The Government has chosen not to act alone against those shifting taxable profits out of this country, preferring an international agreement, but it has no good reason not to take unilateral action against the use of our law to set up tax-avoidance trusts here" - see: Govt can help put boot into tax dodgers.

It's been a similar story with other newspapers. See for example, the Southland Times' Gimmee tax shelter.

But there are some commentators defending the National Government, and downplaying the importance of the controversies. For example, Mike Hosking: says "I think we can be relatively comfortable that we are not a tax haven or a slush fund", and considers the revelations unsurprising ("Tell me something we didn't already know") - see his two-minute video, Mike's Minute: The Panama Papers.

Also at Newstalk ZB, Tim Fookes calls the whole controversy a Media Beat Up. Fookes says the portrayal of the Panama papers issues has been dishonest, particularly in terms of John Key's involvement: "We're being conned, we're being hoodwinked, and the media's to blame". Fookes says it's being "being whipped up by the opposition and their blind hatred for John Key", and "Sadly, the media is going along with it, and dishonestly. On days like this, I'm embarrassed to say I'm part of the media."

Others have also made arguments that the tax haven debate doesn't apply to New Zealand. See for example David Farrar's NZ is not a tax haven.

Finally, for some humour on the controversy, see Andrew Gunn's PM poo-poos Panama Papers, Raybon Kan's Welcome to NZ - 100% Pure tax haven, and Steve Braunias' Secret Diary of The Panama Papers.

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