John Key is taking a risk defending the foreign trust regime in the wake of the global trust fund scandal and its New Zealand links.

If the Prime Minister assumes that the issue may be over within the week, then he is calculating that nothing else with New Zealand connections is lurking in the devastating leak of records from Panama law firm Mossack Fonseca. Mr Key insists New Zealand is not a tax haven but even if it does not fit the criteria, the existence here of nearly 12,000 foreign trusts suggests the financial rules, such as they are, appeal to the industry.

The trusts pay no New Zealand tax on foreign earnings. Their beneficiaries are not registered and their accounts are not filed with any public body. The Government argued this week that arrangements with other countries to share tax information was a powerful deterrent against individuals who sought to conceal their affairs.

Tax experts however have challenged these assurances. Craig Elliffe, a tax law specialist at the University of Auckland, described the disclosure rules as " almost dangerously weak".

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By themselves, foreign trusts are not illegal. The use of tax havens is second nature to owners of substantial assets.

The trove of documents in the Panama Papers, however, has set off inquiries into the source of some assets. The European tax commissioner, Pierre Moscovici, called much of the activity "immoral, unethical and simply unacceptable".

In Parliament the Government refused to allow the Green Party to introduce a Bill that would require foreign trusts in New Zealand to disclose more complete information on the identity of those behind the arrangements, along with annual financial reporting.

The legislation may have been opportunistic, but there is little doubt that international momentum is running strongly in favour of global tax reform and disclosure.

Authorities in the EU want to use the outrage over the Panama Papers to support a planned clampdown on tax avoidance by multinationals.

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.

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The Panama Papers revealed that a senior politician in Malta and a Mexican tycoon had opened trusts in this country with names familiar to New Zealanders - Haast and Rotorua. The papers confirmed that tiny Niue, which is dependent on New Zealand aid, is a favoured location for offshore entities, as is Samoa. President Barack Obama identified the discomfort many people feel about offshore trusts and the tax avoidance industry by reminding Americans of the basic tax principle that everyone is meant to pay their fair share.

The violation of this standard forced Iceland's Prime Minister to step aside this week, and is making life very difficult for David Cameron, Britain's Prime Minister, because his late father had a secret fund in Panama. Authorities in China are scrambling to suppress reports reaching citizens that their president and other elite figures have relatives who control hidden offshore companies.

Mr 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 presence of seemingly untouchable foreign trusts and the recent disclosure of corporate profit shifting contributes to a picture that New Zealand, like many Western nations, accommodates an elite operating beyond the rules which govern the rest of the community.

It is likely to become for Mr Key an increasingly indefensible position.

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