Tax Havens, the Cullen Fund, and the Labour Party

Here in New Zealand we don’t mention tax havens much. We got over that with the Winebox Inquiry in the 1990s, and nobody really wants to go there. They are debating the role of transnational corporations and profit shifting elsewhere in the developed world, as the OECD tries to press ahead with its BEPS agenda. Most New Zealanders have never heard of it. With the National Party in office there is, of course, no corporate tax evasion, and maybe a bit of avoidance. Nothing much to worry about. It turns out that this view is bi-partisan, at least with regard to the investment of funds in the so-called Cullen Fund.

The guardians of the government’s superannuation fund, or Cullen Fund (named after the last Labour finance minister), want more freedom to use investment vehicles parked in tax havens. So the National Government have promoted legislation with a vague title, which Labour also support, which in a few euphemisms allows the use of tax havens with public money. Why bother? Treasury has allowed public money to be diverted through tax havens since the early 1970s, and new legislation wasn’t needed, even if the existing public finance law was not being strictly observed. Nobody seemed to worry about public sector agencies engaging with tax havens until Mr Peters discovered some fraud in the Cook Islands.

Indeed, no one would have even mentioned the role of tax havens for the Cullen Fund if the Green Party hadn’t noticed that this was the purpose of the new bill. When the bill was debated the other night in Parliament two Green MPs mentioned the role of tax havens, and the double standard involved, assuming that New Zealand really does want to participate in the OECD’s project to curb corporate tax evasion. The Green Party referred to it as tax avoidance, something of a semantic difference used when corporations are involved, rather than rich individuals. The Greens were also more worried about the Cullen Fund investing in fossil fuel companies. No matter, the tax havens were mentioned.

We then had the sorry spectacle of the Labour Party standing up to support the use of tax havens, at least from well-known right wingers like Clayton Cosgrove and Stuart Nash. Nash’s contribution was not only right wing, and showed how pro-corporate the Labour Party remain, but was also a completely contradictory position. Nash, who bears the name of Labour’s first finance minister, portrayed himself as an expert in finance, unlike the female Green MPs. He was keen to help the Cullen Fund make the highest possible investment returns, and in the most tax efficient manner. The real doosey was when he seemed to argue that the tax havens in the Caribbean were free from scandal, unlike the Pacific Island versions perhaps. He obviously has not heard of the tax havens leaks published by the International Consortium of Investigative Journalists over the last few years. But he had heard of the OECD’s BEPS agenda, and claimed to support it. So on the one hand he suggested that public money should be invested in Apple and Google; on the other hand, he also claims to want to see them pay more tax, even though this would reduce their profits and dividends, and reduce the return for the Cullen Fund.

Contrast this to the situation in Australia, where the Labor Party there are critical of the use of tax havens, especially by new Prime Minister, Malcolm Turnbull. But because of the greater debate and knowledge of the issue, they also have to accept that public money controlled by government superannuation vehicles has also been channelled through tax havens. At least they have the debate there. Here in New Zealand we try to avoid using the term tax haven, let alone acknowledging the practice. If John Key had got his way we would be living in a tax haven, and not even noticing it. Meanwhile the Labour Party maintain the underlying right wing consensus on corporate control as a charade.

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