New Zealand’s reputation took a hit last week when it was listed internationally with places such as Jersey and the Cayman Islands as a tax haven.

Our reputation for integrity was sullied after it was revealed that this country has been complicit with the powerful and wealthy using it to register trusts here to dodge meeting their tax obligations.

The leaked ‘Panama Papers’ showed that more than 12,000 offshore trusts registered here, apparently to avoid taxation because New Zealand laws don’t require disclosure of beneficiaries or accounts.

Just a couple of weeks earlier, New Zealanders were outraged to learn that large multinationals earning more than $10 billion a year in sales from New Zealand paid just $1.8 million in tax here.

That tax rate means that very wealthy companies are paying a tiny fraction of the rate paid by New Zealand’s lowest income earners.

Like most New Zealanders, I have no problem with people becoming wealthy through hard work and their business skills. Good luck to those who do. What I and other Kiwis object to is when people avoid paying their fair share toward the cost of the benefits we all enjoy from the services the taxes pay for. Those who dodge their tax simply transfer the burden onto honest New Zealanders who pay their share.

The government’s response was that dealing with the big multinationals was something it couldn’t do much about. They said it was for the international community, through bodies such as the OECD, to respond by changing international tax law. We would, National said, contribute towards that effort.

Now it seems that we have lost our credibility in that area by not responding to tax dodgers exploiting our country’s tax laws. If we expect other countries to stop companies avoiding paying tax here, we need to do likewise when individuals or corporates are using New Zealand to avoid taxes in their own countries.

New Zealand was rightly proud of its reputation for good governance, lack of corruption and high standards. Until recently we were rated as the best country in the world in this respect. Sadly over the last couple of years, we have slipped to fourth and the latest scandal will do our reputation further damage.

In light of the damage this is doing to us, John Key’s response was disappointing. His first reaction was that there was no problem with what we were doing and no need to act to deal with tax-dodging trusts.

Perhaps this isn’t surprising because John Key himself, with a background in the international financial industry, is on record as saying that he wanted New Zealand to be “the Jersey of the South Pacific”. That sounds very much like advocating for New Zealand to be a tax haven. National also drew attention to the fact that lawyers and accountants made $24 million a year out of setting up overseas trust accounts.

They have now been forced to do a complete U-turn and not before time. Was the $24 million really the value of our reputation for doing the right thing and our ability to win cooperation from others to deal with tax dodgers in New Zealand?

Tax experts, academics and newspaper editorials have all joined in the condemnation of the government’s do-nothing approach. Most New Zealanders are adamant that wealthy foreign firms should be paying their fair share of taxes from the money they earn here. Equally, we should not be letting wealthy individuals from overseas be registered tax-free here and not pay tax in their own countries.

Being wealthy and powerful is no excuse for those individuals and entities taking and giving nothing back and freeloading on the backs of others. The immediate reaction of New Zealanders is that this is not right. That should have been the government’s reaction too.