Key responds to Cook Islands allegation by Panama Papers leaker

Prime Minister John Key took the unusual step of arranging a 1pm Saturday press conference to respond to allegations from the anonymous source behind the Panama Papers.

This morning, the source – named only as John Doe – released an 1800 word statement on the website of the International Consortium of Investigative Journalists (ICIJ), the group that has released various documents leaked from Panama-based law firm and foreign trust specialist Mossack Fonseca.

Mr Key was the only world leader named in the statement.

"I have as much responsibility for tax in the Cook Islands as I do for Russia," said Mr Key this afternoon.

"Prime Minister John Key of New Zealand has been curiously quiet about his country’s role in enabling the financial fraud Mecca that is the Cook Islands," John Doe wrote (in his statement's only reference to Mr Key or New Zealand).

But at his 1pm press conference, the PM said, "The whistleblower has got confused about my responsibilities. I have no responsibilities fro the tax jurisdiction of the Cook Islands. New Zealand has responsibilities for foreign policy and defence of the Cook Islands, but not for tax. I have as much responsibility for tax in the Cook Islands as I do for tax in Russia."

Video of Key's full stand-up

Closed down after 1988
Asked about why the Panama Papers leaker would tie the Cook Islands to Mr Key, he said he asked tax officials about it this morning and they replied with the theory that "He or she is likely to be European, and Europeans get terribly confused about the Cook Islands because they use New Zealand dollars."

It's also possible, however, that the "confused" European was making a reference to the winebox controversy.

And the prime minister did make an oblique reference to that scandal, saying "Prior to 1988, there were issues with New Zealanders avoiding their tax by having a structure in the Cook Islands," he told reporters at his 1pm stand-up. In 1988 that all closed down and subsequently there have been no issues."

Since 1988, New Zealanders have been taxed on their worldwide income, the prime minister noted.

He also added that the Cook Islands tax controversy was before his time.

No responsibility, but some care
Commentator Bernard Hickey was quick to take issue with the prime minister on social media, saying, "Has New Zealand pressured the Cook Islands to change its trust secrecy/info sharing laws? If not, why not? The Cook Islands uses the New Zealand dollar and Cook Island citizens are New Zealand citizens."

Mr Hickey added, If New Zealand is serious about not being tarred with the tax haven brush, why not stop the Cook Islands from being a tax haven?"

"New Zealand does actually try to support the Cook Islands in improving its tax and the way it operates its system," Mr Key said this afternoon, though qualifying, "It has its own double tax agreement, its own tax – sharing agreement and, over the years since 1988, New Zealand's been working with the Cook Islands to make sure they've got a better structure, and that they're operating in a way with much greater transparency."

The New Zealand government doesn't get directly involved but officials try to provide support and encourage the Cook Islands to have best practice, Mr Key said.

Earlier today, the Prime Minister's office released a statement saying an independent review of foreign trust disclosure rules is now under way by former PwC chairman John Shewan.  Mr Shewan is due to report on June 30. Additionally, Inland Revenue is participating in an OECD review of international tax arrangements.

Overnight, there was more Panama Papers grief for the prime minister, with the Australian Financial Review name-checking his personal lawyer, Ken Whitney, in an extended report on how a controversial Mexican construction tycoon put $100 million into three tax-free New Zealand trusts.

More to come
Today, Mr Key called New Zealand a "footnote" in the Panama Papers. That may be true so far but more could be revealed when a fully searchable version of the leaked Mossack Fonseca papers is released on May 9.

Peter Bale, the New Zealander behind the ICIJ, has already said he thinks there is more to come on New Zealand in the Panama papers.

And this morning on the Nation (where he was interviewed on the same programme as Mr Bale), Winston Peters said he agreed – and hinted he was ready to reopen his winebox.

"Well, I said some time ago that these papers would be very, very serious revelations because 11 and a half million documents and New Zealand mentioned 60 times and us being positioned here in the South Pacific giving aid to countries who were at the same time running tax haven utilities or using all sorts of fancy phrases for cheating and fraud and money laundering, I think that the mention of Mr Key relates to where they’re going to go in one part of the world on this matter," Mr Peters said.

For his part, John Doe said he (or she) was willing to cooperate with authorities "to the extent that I am able", expressing a willingness to help authorities but also noting actions taken against recent whistleblower including Edward Snowden, currently exiled in Russia.

Tune into NBR Radio’s Sunday Business with Andrew Patterson on Sunday morning, for analysis and feature-length interviews.