Monday, 14 May 2012

NZ abandons plan for upping its offshore game

This tale leaves little doubt about the malignant nature of regulatory competition.  PM John Key had plans in place to create a financial services hub in New Zealand, but is backing off after:
"The Government's lead economic and financial policy agency advised that plans to pay international banks to move here represent "a wealth transfer from New Zealand taxpayers to overseas financial institutions."
...plans were drawn up for Key to discuss the proposal with senior international bankers when he visited New York in September 2009. 
That was the trip when the prime minister made headlines with a turn on The Late Show with David Letterman, but Treasury documents show during this visit he was briefed for proposed meetings with the chief executives of Goldman Sachs and Citibank where the hub was to be discussed. 
In December 2010 Key said that a major international bank offered to shift business to New Zealand if tax policy changes were forthcoming. 
The prime minister told the New Zealand Herald the CEO of a global bank had said if NZ zero-rated foreign funds that are not invested in New Zealand, he would move $2.5b in funds here as NZ would be 50 per cent cheaper than Australia. 
Later in the article we see that the only means for this to go forward would have been if complete confidentiality was observed and if the deal was made to be reform-proof in the future:
Stobo's group's blueprint for the hub, tabled in Cabinet, said these deals should be contractually locked in to prevent a change of government torpedoing the deals, and the details of payments should be made "commercial in confidence" and not be available for public scrutiny.
Political malfunction, again designed and built right into the system.  And then bolstered by peer pressure: "Assistance of this type is standard practice elsewhere in the world and is a reality if New Zealand expects to attract first movers of global scale," the report said."  And there's yet more:

Stobo told the Sunday Star-Times such payments were common elsewhere in the world, but conceded the contractual and "commercial in confidence" nature of the proposals were a novelty for New Zealand. 
"That's an issue for public finances and whether the Government's got the appetite for that. [Offering subsidies] is not unfamiliar at all, just the way we're describing it may be relatively new for the public," he said. 

Whether a government has "an appetite for that"--for what?  For hiding from and maybe defrauding its own public?  Incidentally it seems the plan was expected to create a dozen or so jobs, but a report said it would cost $10 million a year in lost revenue.  I suspect they mean lost revenue to New Zealand.  It could be a lot more than that internationally.

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