The Green Party co-leader has done us all a favour by opening up a discussion about why New Zealanders accept massive rorts but get hysterical over minor ones.
Turei admitted she received money she was not entitled to, although she’s not sure exactly how much that was. She is co-operating with the Ministry of Social Development and says she’ll pay back whatever is owed.
The details are sketchy but, apparently, she fudged the number of flatmates she had and thereby got a bigger accommodation allowance than she should have. What the political fallout will ultimately be is anyone’s guess but the latest Colmar-Brunton poll showed a surge for the Greens to 15 per cent. Of course, if Turei wants to see how things might pan out for her politically, she can always ask Bill English.
English was a pioneer in showing how a senior, well-paid politician deals with these things. In 2009 he ended up paying back $32,000 for a parliamentary accommodation allowance he had claimed on a Wellington house he lived in that was owned by his family trust. His actions in claiming $900 a week in taxpayer support were assessed to be technically legal although they were widely viewed as unethical. Legal but immoral, you could say.
He also paid the money back only after coming under intense political pressure to do so, and even then the most he would concede was that taking the allowance was “a bad look”. But although he is still referred to occasionally as the “Double Dipper from Dipton”, it hasn’t harmed his career. He is now our Prime Minister.
Of course, English’s $32,000 was a drop in the ocean that year for repayments — in 2009, our four biggest banks cut a deal with the IRD that saw them pay the IRD around $2.025 billion for structured finance tax deals after some were knocked back by the courts. The deal makes English’s and Turei’s problems with public money look like rounding errors.
And if that gargantuan amount of tax avoidance doesn’t turn your head, what’s also astonishing is that ANZ, ASB, BNZ and Westpac settled at a 20 per cent discount of somewhere between $500 million and $750 million.
No one seems to know the exact figure, although tax QC Tony Molloy reckoned it was a write-off of around three-quarters of a billion dollars, given his calculations that the full amount IRD could have asked from the banks, if penalties were included, was about $2.75 billion.
Molloy described it as “the four major New Zealand banks’ multibillion-dollar assault on the New Zealand tax system”.
Before the banks settled and agreed to pay 80 per cent of what IRD said they owed, the IRD had already successfully prosecuted two High Court cases — one against BNZ and the other against Westpac. IRD was in a winning position but they still settled. “Effectively, a gift was being made to the banks of at least three-quarters of a billion dollars,” Molloy said.
Astonishingly, the IRD commissioner at the time described the settlement with its 20 per cent discount as a “very good result” for New Zealand taxpayers.
"It is the sort of thing Dr Goebbels might have said," Molloy remarked.
So, to be fair, whatever Turei owes, she should be eligible for a 20 per cent discount, just to keep things in line with how our banks do business (and thus presumably her payment would also be eligible for praise from authorities as a “very good result” for the taxpayer).
A more recent event that puts Turei’s fraud — and the hysteria around it — into perspective is that when she made her confession last month, the deadline had just passed for foreign trusts to register with the IRD. The 11,645 foreign trusts operating in New Zealand were required to register by June 30, and provide particulars of all parties, including the settlor and beneficiaries, and assets. They also have to file annual returns and pay registration and filing fees.
By the deadline, only around 3000 had registered. Roughly another 3000 said they wouldn’t register, leaving another 5000 which are legally unable to operate here. Or, to put it another way, two-thirds of the foreign trusts operating in New Zealand decided not to register rather than give even basic details of their operations to IRD.
Revenue Minister Judith Collins responded with her own astonishing bout of Goebbels-speak by claiming the drop-off in numbers was because providing registration details was “onerous”. It was such a preposterous claim I thought I should see the IRD form myself to check. I emailed the IRD to ask for a copy of the foreign trusts documents to see how onerous they might be to fill out but — surprise, surprise — I received no reply and no form.
Collins’ explanation was an insulting attempt to deny the bleeding obvious — the drop-off in numbers was almost certainly a result of trusts deciding they didn’t want their activities exposed to the disinfectant of sunlight because they were dodgy.
London-based financial journalist Clare Rewcastle Brown, writing at Sarawak Report, thought Collins’ explanation was preposterous too. “Who believes that – after all, how burdensome is it to write down your own name?”
Rewcastle Brown knows quite a bit about dodgy trusts since she has been almost single-handedly responsible for busting open the multibillion-dollar 1MDB fraud in Malaysia that threatens to bring down the Malaysian PM, Najib Razak, and has rippled through to the US and Switzerland as the world’s biggest kleptocracy and money-laundering scandal.
Rewcastle Brown's attention has often been drawn to New Zealand’s foreign trusts as a destination for illicit money, including from the 1MDB fund. Earlier this year, she wrote a post for Sarawak Report about New Zealand’s dubious foreign trusts titled “Trust Us — New Zealand Can Hide Your Money!”
She stated: “Time and again, investigators like Sarawak Report find themselves tracing large businesses linked to… Malaysian politicians… only to find the money disappearing behind New Zealand trusts. This was thrown into glaring perspective by the Panama Papers, which revealed how shadowy businessmen the world over were all choosing distant New Zealand to park their money… and one assumes such people are neither attracted by the weather nor the convenience of New Zealand’s location.”
But from our government’s point of view, our foreign trust set-up was entirely legal, and they simply didn’t want to know where the overseas money came from. But many of us find it deeply immoral that our government was happy to have a system where the wealthy from around the world could hide their riches from their own authorities. And deeply immoral that the National-led government defended the former trusts regime so energetically.
Although John Key as Prime Minister and Michael Woodhouse as Revenue Minister made every attempt to downplay the dodgy nature of foreign trusts operating in New Zealand, public outrage eventually forced them to commission tax expert John Shewan to write a report. That led to last month’s changes to disclosure rules and the dramatic fall in the number of trusts.
Unfortunately, the public outrage wasn’t repeated this July when it suddenly became obvious that many of the foreign trusts that failed to register were undoubtedly hiding ill-gotten gains. The media covered the trusts issue fleetingly, and none of the commentators who have crucified Turei thundered against the trusts and the politicians who had denied what was really going on behind their legal facade.
We might conclude that the behaviour of the foreign trusts was legal (in New Zealand at least) but immoral if the money hidden here was tainted, as it almost certainly was. Conversely, if Turei was genuinely unable to feed her child on a benefit, her actions in lying to the welfare department were illegal but not immoral.
Need and greed, we are discovering, are two very different things when it comes to taking advantage of the system. Turei has sparked a debate about the existence of one law for the rich and another for the poor, and why the state is far more lenient on tax evasion than welfare fraud. Whatever happens to her, politically or personally, she has done us all a favour by helping to raise it.