The release of tax consultant John Shewan's report into foreign trusts sparked scenes in Parliament reminiscent of the trial to find out who stole the Queen of Heart's tarts in Alice in Wonderland.

That trial included the Hatter as a witness. He began to refer to something the March Hare had said only for the March Hare to deny saying anything even before the Hatter set out what he was alleged to have said. The Hatter then moved on to a comment made by the Dormouse only to lose his train of thought and forget what the comment was.

So it was as both Prime Minister John Key and Labour leader Andrew Little struggled to explain away their previous words on foreign trusts and John Shewan.

Key was the Mad Hatter, trying to insist he had not said things he had said - or at least he had not meant what he was said to have meant when he said them.


The report was effectively confirmation of much that Key had denied was wrong with the foreign trust regime. Shewan found that although New Zealand was not technically a tax haven, the disclosure regime was so weak there was a perception of New Zealand as "generally a soft touch". He also said while there was no evidence illicit funds were being stashed away, it was reasonable to assume foreign trusts were indeed being used to hide funds or help tax evasion.

Key's response was to agree to make the changes Shewan had recommended while arguing there was barely a hair-width's difference between what the report said and what he had said.

Shewan described the disclosure rules as "inadequate" and "not fit for purpose in the context of preserving New Zealand's reputation". When Key was asked how this fitted in with his own description of those rules as "broad and deep", the PM put on his tap shoes and danced up a storm on the head of a pin. He insisted his own description was compatible with Shewan's if you looked not at the amount of information that was being collected but where it was placed. He insisted Shewan had also made it clear New Zealand had a "very high international reputation" and that the problem was not the foreign trusts regime but "misguided New Zealand politicians trying to score domestic political points".

Meanwhile Labour leader Andrew Little took on the role of the Queen of Hearts and foolishly prejudged the outcome of the case.

The Shewan report should have been a major victory for Labour. It vindicated the party's criticism of the foreign trust regime and embarrassed the Government for its reluctance to look into the regime. It should have provided weeks of fun for Labour rubbing Key's nose in it.

Sure enough, Little leapt on it with glee, singing paeans of praise for Shewan, his report and "his formidable, technical tax brain" in Parliament.

Alas, Little had bitten the hand that feeds. Only two months earlier, Little had questioned the choice of Shewan to undertake the review and made incorrect comments about Shewan's work for the Bahamas. Little made the comments in April and they featured prominently in the media - as did Shewan's denial.

It was not until two months later, on a dozy Saturday afternoon a few hours before the All Blacks were due to take the field, that Little put out a statement in which he said he accepted Shewan's assurances that the media report Little had based his comments on was wrong. It was a half-hearted and begrudging effort at putting things right.


But it seemed Little had got away with it - until this week when he also claimed Shewan had not asked for an apology. Shewan promptly corrected him, providing the email in which Shewan had indeed asked for an apology after Little's delay in retracting the statement.

Now it was Little's turn to take a spin on the head of the pin, his spokesman arguing Little had been referring to his initial conversation with Shewan rather than any subsequent correspondence.

As of yesterday there was still an unhappy Shewan, a stubborn Little refusing to apologise and come Question Time we found that after just one day, Labour had also dumped the topic of the Shewan report and foreign trust reforms from its list of things to embarrass the Government over.

The Mad Hatter had got off scot-free and the Queen's tarts remained lost.