Panama Papers: Mossack Fonseca's man is former IRD staffer

A former IRD staff member has been revealed as the New Zealand agent for Mossack Fonseca, the law firm at the centre of the Panama Papers leak.

According to new reports, New Zealand is at the heart of a "global money go-round" for the wealthy to avoid tax.

Mossack Fonseca ramped up its interests in New Zealand as one of its jurisdictions in 2013, a joint investigation by journalist Nicky Hager, Radio New Zealand and TVNZ has found.

"The really important thing about these documents is that as soon as you look in the Panama Papers you see tens of thousands of documents where the tax haven [they're] talking about is New Zealand - that New Zealand is functioning as a tax haven," Hager told the Herald.

"When you're faced with concrete evidence it's not enough to just keep repeating the denials."

Prime Minister John Key told Newstalk ZB that he had asked the IRD what would happen if the Government simply banned foreign trusts, and their experts had said it was complicated and advised caution.

"There is a foreign trust capacity in New Zealand. That has been there for a very long period of time.

"The truth is that all these different vehicles around the world can be used for a very good reason. So, for instance, if you take a place like Mexico, they might be worried about corruption in their system, and so someone wants to have a trust that's not registered in Mexico. They could be worried about kidnappings," Mr Key said.

"So people register a trust. When they do that the assets aren't in New Zealand, the trust is registered in New Zealand. There are a lot of legitimate reasons. But if there's illegitimate behaviour, then the Government will on one extreme stop trusts if that can practicably be done as the right thing to do, or on the other end fix all of that."

Mr Key said reports this morning had not identified New Zealanders who weren't paying tax, and in one respect that showed New Zealand's laws were working.

He again strongly denied that New Zealand was a tax haven, and said that was not the view of the IRD or international media. He repeated past attacks on Mr Hager as a "well known left-wing conspiracy theorist".

"When people scream out that NZ is at the forefront of all of this stuff, that's simply not true."

Following the first release of details from the papers last month, the Government began a review of the disclosure rules for NZ's foreign trusts. Opposition parties have criticised the review's narrow focus.

Mr Key said the tax expert leading that review, John Shewan, would be able to take into account any revelations from the papers, and IRD officials would be examining them too.
"If more is required, if there should be better information ... New Zealand will do it.

"We are working with the OECD and others to see if there are other tax changes we can make to stop what are effectively the mismatches around the world that actually allow multinationals amongst others to move money around the world. We want to stop all that stuff."

Accountancy firm Bentleys, with an office in the heart of Auckland's business district, is an agent for Mossack Fonseca in New Zealand and can set up a trust for wealthy foreigners for as little as $4000, according to TVNZ. This means they can stay anonymous under New Zealand's limited disclosure rules.

For another $3000 a year in administration fees, Bentleys will file a form to Inland Revenue which confirms foreign trust clients do not need to pay any tax under New Zealand law.

But Roger Thompson, a former IRD staffer who runs Bentleys, said New Zealand is not a tax haven. Instead it is a "high quality jurisdiction for trusts with a benign tax system in certain circumstances", he told TVNZ.

His services are used for legitimate purposes in compliance with the law, said Mr Thompson, and clients are rigorously vetted. Offshore companies and trusts are routinely used for entirely legal purposes, and Mossack Fonseca maintains that it has always complied with international protocols.

Roger Thompson: At the centre of a new Panama Papers controversy.

A reference to a person or entity in connection with the Panama Papers is not therefore in any way indicative of any wrongdoing or impropriety.

The Herald revealed in March that Bentleys was the base for Orion Trust New Zealand, a company that managed a trust for the assets of former Malta Energy and Health Minister Konrad Mizzi, who has since come under fire after he was named in the Panama Papers leak.

The International Consortium of Investigative Journalists, which orchestrated more than 400 journalists around the world to comb through millions of internal Mossack Fonseca documents, is planning to release more information tomorrow morning. Yesterday, Andrew Little announced Labour would abolish foreign trusts in New Zealand - a move which Prime Minister John Key described as a knee-jerk reaction.

Labour and Greens say a review of New Zealand's foreign trust regime needs to start again following new claims about wealthy foreigners hiding their money in New Zealand trusts.

Mossack Fonseca's interest in New Zealand increased in late 2013 and emphasised confidentiality and zero-tax benefits to its clients "allowing for the speedy formation of appropriate mechanisms for wealth protection, inheritance and tax planning".

"To conclude, New Zealand offers the same or better vehicles than any other jurisdiction but it has the advantages of being an OECD member country, having a modern, flexible and secure legislative system and having signed numerous agreements to avoid double taxation with countries such as Mexico, Spain, United States, Great Britain, China, France and the Netherlands," according to Mossack Fonseca's website.

An article published in the Australian Financial Review last week shed new light on the number of foreign investors who had moved their cash and assets into tax-free New Zealand-based trusts, and the way these investors were able to minimise their tax.

It said demand for New Zealand's foreign trusts massively increased last year and the law firm at the heart of the Panama Papers, Mossack Fonseca, had urged its New Zealand office to "chase the money".

An Israeli security firm chief, an electrical engineer in Spain, a banker from Ecuador, two Colombian car dealers, and wealthy Mexican society figures are among Mossack Fonseca's clients with trusts in New Zealand, according to Radio New Zealand.

Asaf Zanzuri, the Israeli chief executive of a security firm which sells equipment to various Latin American governments, is also named with a New Zealand connection in the Panama Papers.

At the same time as negotiating a multi-million dollar contract to supply drones to the Mexican government, Zanzuri used Mossack Fonseca NZ to establish a foreign trust in New Zealand called the Sapphire Trust.

Another client was the president of Italcambio, a Venezuelan bank, called Carlos Dorado.

He and a Mexican lawyer, Luis Doporto, set up the Abbotsford Trust, which was used in a deal with a Dutch incorporated company to buy a Mexican pharmaceutical company.

Mexico's inheritance laws, which cannot guarantee family wealth goes to the right people, have been a rich source of business for Mossack Fonseca in New Zealand and Bentleys.

Mexico City based Bald Eagle Services, described as one of the local Mossack's office best customers, has sent a steady stream of wealthy Mexicans to create New Zealand trusts to protect their estates.

And in another case, a Russian-speaking, Spanish based electrical engineer, Jose Ramon Lopez Lombana, asked for four New Zealand companies and four New Zealand trusts to be established.

These were to deal with four Mexican companies, which pass money and fees from internet trading through New Zealand to a bank account in the Czech Republic.

Mexican businessman Hinojosa Cantu, who is being investigated in his home country in relation to housing deals for government figures, is also an investor.