Foreign trusts whittled down after new rules

An activist clutching a suitcase stuffed with fake money demands greater transparency in new legislation following the ongoing Panama Papers affair. Photo / Getty

About 3000 foreign trusts have told Inland Revenue they want to register under new rules that require them to reveal financial information and their ultimate owners.

That is almost 9000 fewer than the 11,750 which existed before the Panama Papers scandal erupted.

New Zealand's foreign trust industry came under the spotlight last year in the wake of the Panama Papers - a cache of 11.5 million documents leaked from Panamanian law firm Mossack Fonseca.

Labour spokesman for Revenue, Michael Wood, said the fact that so many trusts exited showed the need for a transparent, searchable register.

"It's no surprise that the 12,000 foreign trusts registered in New Zealand has wilted to around 3000 after IRD's deadline for more information has passed," Wood said.

"The Panama Papers revealed strong evidence that there was shady behaviour in a lot of these trusts and that many people didn't want that behaviour to be known," he said.

This document trove, according to the group of journalists that analysed it, allegedly showed New Zealand was being used as a tax haven and raised questions over whether this country's foreign trust industry was open to abuse.

The new regime required all trusts to register with Inland Revenue by June 30. Around 3000 said they did not want to register.

The tax haven contention was rejected by former PwC partner John Shewan, who was commissioned to review trust disclosure laws.

Shewan said in his subsequent report that New Zealand was not a tax haven but that the disclosure rules for foreign trusts were "not fit for purpose"and "light-handed".

The Government adopted Shewan's recommendations and earlier this year introduced rules requiring people setting up or administering foreign trusts in New Zealand to reveal financial information and the identity of any beneficiaries.