The Tribune

By KHRISNA VIRGIL

Tribune Staff Reporter

kvirgil@tribunmedia.net

STATE Finance Minister Michael Halkitis has said international reports that claim New Zealand value added tax consultant to the Bahamas John Shewan assisted this country in maintaining its tax haven status are “nonsense” because the government never intended to tax financial services.

This is due to the fact that financial services are viewed as investment activity as opposed to consumption activity, which VAT is meant to capture, the Golden Isles MP explained to The Tribune. He said this was the “norm” around the world.

He was contacted for comment on the matter, as Mr Shewan is now the subject of fierce criticism in New Zealand after being appointed the expert who will investigate that country’s offshore trusts industry.

Opposition parties in New Zealand, according to international reports, have said Mr Shewan is the wrong person to head the inquiry because he is too involved in the same industry that he has been tasked to investigate.

He has said he is unbothered by the questions of his integrity, as it is a part of politics.

Mr Halkitis told The Tribune yesterday that he agrees with Mr Shewan. It comes as Prime Minister Perry Christie continues to defend this country amid the leak of the “Panama Papers,” which revealed that the Bahamas was ranked as the third most popular tax haven used by the Panama law firm Mossack Fonseca, the source of the data leak that has rocked the world.

“This appears to be nothing more than a political attack on Mr Shewan by the New Zealand opposition,” Mr Halkitis said.

“I agree with Mr Shewan. The claims are bizarre nonsense. We always intended to exempt financial services from VAT because financial services are viewed as investment activity as opposed to consumption activity, which the VAT is meant to capture. This is the norm around the world.”

Mr Shewan, according to the New Zealand Herald, said that having worked on tax matters for nearly 38 years, it was normal to have dealings with tax authorities and for some of those cases to go to court.

But he took issue with claims by Labour Party leader Andrew Little in New Zealand’s Parliament yesterday that he had advised the Bahamas government on protecting its financial sector from tax changes, the New Zealand Herald said.

In 2014, Mr Shewan and former National Party leader Dr Don Brash came to the Bahamas to provide advice on VAT implementation.

The trip was arranged after a meeting between New Zealand leader John Key and Mr Christie, the Herald reported.

Mr Little said in New Zealand yesterday that Mr Shewan and Dr Brash had effectively advised The Bahamas - a country known for tax haven activity - on how to protect its offshore financial services industry and maintain its haven status.

Appointing him to lead an inquiry on New Zealand’s offshore trusts industry showed a lack of judgment, he has argued.

Mr Shewan said Mr Little’s claims were “unfortunate and misleading.”

He has said the Bahamas government needed assistance in making its tax changes more workable.

In relation to the financial services industry, he recommended that the Bahamas follow New Zealand’s example and exempt them from goods and services tax (GST). Linking this advice to protecting the country’s tax haven status was “totally wrong,” he said.

On Monday, Mr Christie said the “Panama Papers”, has further undermined the embattled financial services industry of the country and wider region.

He went on to note that although the country had stringent regulations, it was still too early to predict what impact the international scandal will have on international financial centres.

Mr Christie pointed to the historic data leak as the most recent challenge facing the Caribbean’s financial services.

Millions of documents were leaked by Mossack Fonseca to a German news agency, which contacted the International Consortium of Investigative Journalists (ICIJ) to help analyse the data. Mossack Fonseca is said to have played a major role helping clients use offshore centres.

Data from the leaks reveal information about current and former heads of states and relatives/friends of country leaders, including Russian President Vladimir Putin. Since reports on the leak were published earlier this month, Iceland Prime Minister Sigmundur Davíd Gunnlaugsson has resigned amid widespread public outrage over allegations that his family hid millions in an offshore account. He became the first major casualty of the Panama Papers.

Last week there were calls for British Prime Minister David Cameron to resign after it was revealed that his father avoided taxes for his investment fund by moving it to The Bahamas and employing scores of Bahamians, including a lay bishop. Yesterday, Mr Cameron became the first British leader to disclose his tax returns in an attempt to defuse the row.