New Zealand prides itself on being one of the easiest and quickest places in the world to register a new company. So it does not come as a complete surprise that this country appears on a list of those commonly used by foreign wealth managers for the creation of tax-avoidance trusts. The list disclosed yesterday from records of a Panamanian law firm, Mossack Fonseca, also includes the Isle of Man, Jersey, Singapore, Samoa, Niue and some well-known Caribbean havens. New Zealand was described as a country that uses its laws to "make foreign profits tax-free and invisible for beneficiaries of its offshore trusts".
According to the firm's documents, the 12,000 or more offshore trusts in New Zealand pay no tax here, their beneficiaries are not registered and their accounts not filed with any public body. If this information has been gathered by New Zealand regulators, it appears not to be passed to foreign governments.
The news is an embarrassment to a Government that claims to be playing its part in international efforts to combat multinational companies shifting their profits to tax havens, and it follows a Herald investigation last month showing 20 foreign companies reaping nearly $10 billion of annual revenue in New Zealand are paying almost no tax here. So we seem to be losing both ways - failing to tax wealth foreign firms make here, and letting wealth made elsewhere be registered here tax-free.
The Government has chosen not to act alone against those shifting taxable profits out of this country, preferring an international agreement, but it has no good reason not to take unilateral action against the use of our law to set up tax-avoidance trusts here. If an effective response would simply send that business to the usual havens, so be it. New Zealand is getting nothing except accountancy fees from trusts set up by foreigners for the purpose of not paying tax anywhere. We are running with the hare and hunting with the hounds.
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It is time to put ourselves unequivocally on the side of the hounds. New Zealand should require all trusts to name their beneficiaries and file accounts that show where and how much tax has been paid on wealth generated by the trustees' assets, if it does not do so already. And it should be sharing the data with other jurisdictions in which the trustees operate.
Most of those small island states in the Mossack Fonseca material are tax havens without much else going on. New Zealand and Singapore are not like them. We are open, trading economies. Together, we pioneered the Trans-Pacific Partnership. We can point the way to multi-lateral taxation rules too. By exposing those hiding wealth here from places where it was made, New Zealand can take practical steps that might even help the interminable OECD talks on an international tax treaty.
To make trusts more transparent and accountable ought not compromise the ease and speed of company registrations in this country. It is the efficiency of our regulators that matters, not the relaxation of sensible and equitable requirements. Free riders are not welcome here.
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