If you believe the hype of our cottage foreign trust industry, it's bigger than avocados, bigger than flowers and world famous - but not in New Zealand.

The sector, normally known for low-profile discretion, has found itself uncomfortably in the spotlight over the past month.

First, the Panama Papers - an unprecedented leak of more than 11 million documents from Panamanian law firm Mossack Fonseca - showed the use of such structures to hide cash from authorities.

Then John Key's personal lawyer, Ken Whitney, was this week revealed to have led lobbying efforts to head off an embryonic bid by the Inland Revenue Department to crack down on the sector.


In an ironic twist, Key was forced to put that review back on the table following a furore over the Panama Papers, prompting Official Information Act requests from the Green Party which uncovered Whitney's email to the Revenue Minister.

The lawyer, executive director at boutique specialist firm Antipodes Trust Group, said in December 2014: "I have spoken to the Prime Minister about this and he advised that the Government has no plans to change the status of the foreign trust regime."

While that email has sparked political debate over the relationship between Key, Whitney and Inland Revenue's policy-formation, other material in the OIA release provides a bounty of information on the scale, motivations and self-impressions of an industry that has largely operated under the radar.

As Whitney put it in that email, foreign trust providers were keen to protect "an industry which has been painstakingly built up over the last 25 years or so".

Whitney was one of a handful of small firms and barristers, along with Cone Marshall, John W. Hart, OliverShaw, Anchor Trustees and Asiaciti Trust New Zealand, who subsequently met with the then Revenue Minister Todd McClay on December 18, 2014.

In a briefing prepared before the meeting, the industry group cited a Bell Gully study putting the industry on par with the avocado or flower exporters. That study estimated gross annual incomes for the sector of $25 million, possibly exceeding $30 million, and supporting 300 jobs.

"This, in itself, creates a minimum tax advantage for the country of at least $10,000,000 per annum," the note said.

Inland Revenue, looking at their own hard numbers from the sector, concluded in a report prepared around the same time that, while the firms were booking incomes of $24 million, they were only paying $3 million in annual taxes.


Figures from the New Zealand avocado industry suggest that comparison was exaggerated, given reported fruit exports of $92 million in 2014.

The briefing note explained how the sector attracted "high wealth families" as clients, who were attracted by New Zealand's political stability, incorrupt public service and, particularly, our "respect for privacy and commercial confidentiality".

New Zealand was said to be competing for this business with similar zero-tax structures in Singapore, Israel, Hong Kong, Malta, the Netherlands and the United Kingdom and United States. But the industry expressed concerns that even a proposal to tinker with tax rules for the sector could gut the industry as clients lose faith and take flight.

"This would likely undermine the trust and confidence built up over many years, whereby high wealth families have come to trust New Zealand as a safe country," the note said of making a proposal public.

The briefing blamed the interest in their business by Inland Revenue on "confusion in the tax officials' minds" who were conflating their benign provision of "family planning and succession services" with the international abuse of shell companies and corporate profit-shifting.

"A narrow focus on taxation does not do justice to the country nor the trust industry," the note urged.

A draft agenda for the meeting circulated by OliverShaw stated in bold "there is no need for a general public review", and the industry sought assurance from the minister that even if one were to be announced, it would explicitly rule out making the structures subject to taxation.

Inland Revenue officials prepared a Q&A for McClay for this meeting. The entirety of this document is blacked out in order to "protect the confidentiality of advice".

While what is said during that meeting was not disclosed, a representative of OliverShaw wrote some months later they were "very pleased with their meeting with the minister".

Some months later, in May, Inland Revenue policy manager Carmel Peters broke the news to her colleagues that the sector wouldn't be put under the microscope.

"Our minister has decided that a review of foreign trusts will not be included on the current tax policy work programme owing to wider government priorities."

The note from Peters did contain a final caveat, which came into play less than a year later when Key appointed former PwC chairman John Shewan to run a ruler over the sector.

"The Government has an ongoing responsibility to consider whether its regulator settings are facilitating inappropriate behaviour in other jurisdictions," Peters said.

"It is possible that, in the future, this responsibility may require us to review the regulator requirements applying to different types of investment or business vehicles that can be established under New Zealand law."

CORRECTION: An earlier version of this story said Minister McClay met three times with the foreign trusts industry. Only one such meeting took place.