By KASEY McDONNELL

The Panama Papers have been big news across the globe ever since they were leaked in April 2016. 11.5 million documents were leaked to investigative journalists from the Panamanian company Mossack Fonseca and controversies have been popping up in the media ever since. Nearly two months on, the Panama Papers are still having significant repercussions in global news. However, with these stories tackling big concepts like tax havens, trust schemes and the idea of legal practices covering up criminal activities, it can be hard to grasp exactly what the Panama Papers actually mean, in any wider context, for society.

In a nutshell, the Panama Papers are documents leaked from a law firm in Panama, Mossack Fonseca, which reveal how it exploited tax law so rich individuals and companies could avoid having their wealth taxed. Mossack Fonseca has been doing this with wealthy individuals and companies by creating ‘shell companies’, essentially a company that does business without any assets of their own, in countries with lower tax to avoid tax requirements in their home country. The Panama Papers have received a significant amount of media attention because they show the scale of tax avoidance that is going on in the world. The Tax Justice Network estimated earlier this year that there is between $21-32 trillion of wealth that is not being taxed. The ways that this wealth isn’t being taxed are completely legal through tax havens and companies like Mossack Fonseca.

The Panama Papers also reveal the involvement of political leaders in hiding money. This includes the Icelandic Prime Minister, Sigmundur Davíð Gunnlaugsson, who was forced to resign due to public outrage over his family hiding assets offshore to avoid tax. David Cameron, the Prime Minister of the UK, was also put under pressure when it was found that his father avoided tax with Mossack Fonseca’s help by setting up shell companies that hid his income. Vladimir Putin, President of Russia, is connected to the Panama Papers through a $2 billion money trail set up by Mossack Fonseca involving one of his close friends and Russian state banks.

It isn’t known who leaked the Panama Papers, and as of the 31st of May they haven’t revealed their identity to the public. But, on May 6 the leaker of the documents spoke out to news organisations about why they did it in light of the response to the leaks. They feel that “Income inequality is one of the defining issues of our time” and wanted to use the scale of the revelations to start a debate around tax avoidance and whether moving money to other countries to hide it from tax should be legal, as it currently is.

In their written response to the world about the Panama Papers, the source of the leaks specifically accuses New Zealand and John Key of enabling “financial fraud” in the Cook Islands. While this specific example was used by the source of the leaks, the media’s focus has been on other ways New Zealand has been mentioned in the Panama Papers.

The biggest debate here about the Panama Papers is whether New Zealand is a tax haven. According to the Government, New Zealand does not fit the definition of tax haven because we pass the OECD checks which define a tax haven. According to opposition parties and a team of journalists including Nicky Hager, and journalists from TVNZ and Radio New Zealand, New Zealand is a tax haven because of its rules around foreign trusts and their ability to hide money from tax.

Foreign trusts are similar to regular trusts; a way to protect assets and wealth by putting them into something that is separate from an individual. For example, if I had $1,000 in a trust and a bank took my personal belongings to pay off debt, they couldn’t access the $1,000 because it’s not technically my money, it is the trust’s money. The biggest difference is that trusts held by New Zealand residents are taxed by the Government but foreign trusts are not. Currently New Zealand rules around foreign trusts mean that any assets and money held in trusts by foreign residents don’t get taxed in any way if the trust isn’t doing any business in New Zealand, according to trust-nz.com.

Foreign trusts also require some disclosure of information but it is contested as to whether the amount of disclosure allows the Government to know whether trusts are being used legitimately. According to Stuff.co.nz, the Government currently does not require trusts to disclose who is depositing money into trusts, which has been subject of multiple controversies. Most recently, there have been allegations that New Zealand’s foreign trust laws have allowed the family of a former Khazakstani Prime Minister convicted of corruption, to hide ownership of a $15 million home with a foreign trust. These kind of reports have been popping up frequently since the Panama Papers were released.

The Government, in response to the Panama Papers leaks, has started an independent review into disclosure laws around foreign trusts, headed up by tax expert John Shewan. This investigation is looking into whether the information that the government has about specific trusts is detailed enough to stop people abusing foreign trust law.

Opposition parties have argued that more needs to be done to respond to the Papers and there has not been an official report released yet. Currently, the position of the Government is that there isn’t an issue around the current state of foreign trusts in New Zealand, but they are open to the recommendations of the inquiry. According to the New Zealand Herald, 57% of New Zealanders were ‘concerned’ about New Zealand being a tax haven. In the same survey, it was found that 46% of respondents felt that the Government was responding poorly to the leaks.

Regardless of whether New Zealand is a tax haven, the questions about tax law here and abroad that are posed by the Panama Papers need consideration. As income inequality becomes a more present topic in New Zealand politics as well as internationally, issues like the Panama Papers bring up questions about what action, if any, the public want for reform. While it can be difficult entering discussion around complex issues like tax havens and foreign trusts, being informed about the issues that the leaks raise is important.