Bad Apples and the ‘perfectly legal’ media

There has been a spike of interest in the blog, which is no doubt due to the media frenzy over the so-called ‘Paradise Papers’. I have been busy working on the historical aspects of tax haven activity, and not blogged much this year. The Panama Papers and database provided material for most of the posts, so I should be glad that the ICIJ has another massive leak to work with. But things have moved on. For the bloggers it has to be said that the death of Daphne Caruana Galizia, the Maltese journalist, was a more significant story, and a huge setback to those wanting to scrutinise tax cheats.

Daphne took risks and named names. The ICIJ name names, but only those who are already well known, mostly political figures, and who are easy targets. So not only do they cherry pick the targets for their stories, and seek to maximise attention, but they also play safe. How many times in the coverage so far have the media outlets framed their coverage by stating that everything is legal, and merely tax avoidance. This has been made worse by the decision to include the BBC in the team, one of the most conservative broadcast outlets in every sense of the term. On BBC World, for instance, they began stories by saying the vast majority of the 13 million documents were ‘legal’. Really? What makes them ‘legal’ according to the media, and how would they know?

This blog is based in New Zealand. In the past there has been a loose association with the ICIJ, which means a handful of media people saw documents from the previous leaks. That didn’t lead to many stories anyway. We are more likely to get in-depth reporting from the Australian Financial Review, but that publication has a paywall, so any good Australasian or Pacific stories have to be filtered from very risk averse media outlets. But my main point is that the tax authorities here have what is known as a ‘general anti-avoidance clause’ in the tax code. Even though they are reluctant to use it against the foreign corporations operating here, it is up to the I.R.D. to decide if tax avoidance is legal or not.

So back to the BBC coverage of the British establishment that are linked to the Appleby firm, and therefore appear in the Paradise Papers. There are obviously some soft targets here, mostly in the royal family, and the odd millionaire sportsman. But the main man that was exposed was a Tory Party insider, Lord Ashcroft, and this was a great target for the BBC, partly because it helps make them seem less politically biased. So on the BBC Panorama programme we saw their reporter, Richard Bilton, appear to confront Lord Ashcroft at the Conservative Party conference. He then pursued him for some minutes across the conference venue to the bathrooms. This was quite amusing, and was vaguely reminiscent of those old Benny Hill skits, if it had been speeded up and with soundtrack added. But it explained nothing about how tax havens work.

We haven’t been able to access any of the actual documents from the previous tax haven leaks, and there is no sign of that policy changing. But the ICIJ should also be criticised for the misleading coverage, that targets the well known personalities and not the real crooks; and because of the erroneous claims that there is no obvious illegality or tax evasion involved. As mentioned, how do the media know what is evasion, or mere avoidance, without legal advice or rulings from the respective tax authorities? By claiming that almost all of it is ‘perfectly legal’, one of the media’s favourite cliches, they are not helping the fight against tax havens at all. There is a systemic problem, and tax havens are used for tax evasion by definition. It is the media who seem to be claiming that tax havens are legal, and avoidance is the default position, if only because of a deference to the legal professionals that exploit them.

No, the media should now be called out for failing to report the offshore leaks accurately, as well as preventing civil society groups and experts from researching the documents. It is the media that have decided that the only dubious cases are those of high profile people, who are effectively ‘bad apples’ in a system that is functioning as expected, given the limitations of government action. For a while it seemed that, with the Panama Papers, it was leaning towards tax evasion as the norm for the use of offshore structures and trusts. But the ICIJ have brought back into the mix the multinationals, like Apple, who are not the ‘bad apples’, and are seen to be merely playing the system, but within the rules. It is usually not the rules that need changing, it is actually the existing tax laws that are not being enforced for the tax evaders.

Addendum 20/11/17: The ICIJ have now added the data from the Paradise Papers to the Offshore Leaks database. But neither them nor the New Zealand media have observed the political exposed persons in it from New Zealand. The most significant is the current head of state, the Governor-General, Patsy Reddy. Dame Patsy, then just Patricia L. Reddy was a former a tax lawyer with Brierley Investments Ltd. Through this she, and a number of other B.I.L. people, are linked to the Appleby law firm. She was involved in two entities: one is an Australian company, Oil Basins Ltd; and the other was called Depositary (Bermuda) Ltd. Reddy was a director of Depositary (Bermuda) from December 2000 to April 2005. Another New Zealand director during that time was R.J. Diack, the former Bank of New Zealand executive who was also in the centre of the Winebox documents, and was closely linked to B.I.L. accountant, B.S. Paddy Marra. Even Sir Ron Brierley himself appears in the Paradise Papers, in his role for Gucco Leisure Ltd, and offshoot of B.I.L., that had been a listed company in New Zealand and Singapore. Philip Burdon, the former National Party cabinet minister, and a millionaire, was also associated with Gucco Leisure. Another key figure from the National Party in the 1990s was Jennifer Mary Shipley, who was briefly Prime Minister. She appears in the Paradise Papers through her activity on the boards of Richina Pacific and Richina Leather Ltd, the former company being linked to the failed construction company Mainzeal.


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