The naming of New Zealand as a tax haven which allows foreign investors to hide their income in secretive trusts will not force the Government to change any tax rules, Prime Minister John Key says.
New Zealand's trust laws came under new scrutiny today after a massive leak of documents from a Panama-based law firm revealed that this country played a major role in allowing overseas investors to hide their tax secrets.
The Australian Financial Review reported that the law firm, Mossack Fonseca, operates across 21 tax havens, including New Zealand and more well-known Caribbean havens.
Speaking to reporters at his weekly press conference, Mr Key denied that the "Panama Papers" had embarrassed the Government or created a reputational risk.
New Zealand had a robust, legitimate tax regime which required foreigners to register their trusts, he said.
"Tax havens are where there's non-disclosure of information. New Zealand has full disclosure of information."
New Zealand was a signatory to international tax treaties which allowed information exchange between jurisdictions, he said, and a review of New Zealand's foreign trust rules by the OECD in 2013 gave New Zealand a "clear bill of health".
The 11 million leaked documents show that Mossack Fonseca's services appear to have been used to facilitate illegal activity including money laundering. They also implicated New Zealand-based trusts in a political scandal in Malta.
Mr Key said he knew nothing about the Maltese Government minister's trust in New Zealand. There were many legitimate reasons that a foreign investor might set up in New Zealand, he said, including its stable democracy and robust legal system.
The Maltese official's trust was one of 12,000 foreign trusts in New Zealand which do not pay tax on foreign income. They generate around $24 million in fees a year.
Inland Revenue warned in 2013 that New Zealand's foreign trusts posed a reputational risk.
Revenue Minister Michael Woodhouse ruled out any changes, saying New Zealand had "world-class" tax rules.
"The tax treatment of foreign trusts may come up in the OECD's Base Erosion and Profit Shifting work programme in which case we would look at our own rules in the context of everyone else's," he said.
Green Party finance spokeswoman Julie Anne Genter said New Zealand's trust laws were unsustainable, and that the foreign trust industry should no longer able to operate in secret.
"New Zealand is ... being described as the 'quiet little achiever' as a tax haven for criminals," she said.
She wanted the disclosure regime to be strengthened immediately to require more complete information including a settlor's identity, resident country, and financial reporting.