Prime Minister John Key appears to have softened his defence of New Zealand's tax-free foreign trusts, saying that the Government would consider any recommendations to tighten the rules.
Mr Key said today that he did not "hold a candle" for New Zealand's foreign trust laws and revealed that one of the reasons the Inland Revenue Department (IRD) had not reviewed them was its huge workload.
The leak of more than 11 million documents from a Panama-based law firm drew attention to New Zealand's tax-exempt foreign trusts, which have been reported to be attractive to offshore investors because of minimal disclosure requirements.
The documents showed that a senior Malta politician and a Mexican tycoon had opened trusts in this country.
Mr Key is now under pressure to act as New Zealand is described as a "tax haven" in some international media coverage of the leak.
Yesterday, he repeatedly insisted that trust laws had been unchanged since 1988 and no tweaks were required. He also pointed out the $24 million in income they provided through accountancy fees.
Speaking to reporters at Parliament this morning, he appeared to be better briefed on the issue.
He said New Zealand was a signatory to 40 double tax agreements and 11 tax information-sharing agreements -- one of which was with Malta.
That meant any trust and its trustees had to be recorded by New Zealand and any of those countries could ask for disclosure of these details.
"It's not like we're trying to operate in some black hole," he said.
However, legal experts say New Zealand's trust laws allow investors to keep their identity, country of residence, assets, and any trust beneficiaries a secret. Foreign trust holders were also not required to file financial records with an institution in New Zealand.
The Green Party will this afternoon seek leave to urgently debate a law change which would require these details, and others, to be disclosed by a person setting up a trust in New Zealand.
Co-leader James Shaw said the bill would put an end to the "legalised secrecy" which made foreign trusts so attractive to criminals and tax cheats.
Mr Key said the Government was "quite happy" to tighten up the rules if it received any recommendations. It would have to be certain, however, that any amendments did not undermine New Zealand's tax base.
The IRD warned about the reputational risks related to foreign trusts in 2013.
Mr Key said the former Revenue Minister Todd McClay consulted on the issue at the time, and was told any changes would require a significant amount of work. The department already had a large work programme, he said.
"If the situation changes and people think it's warranted then they should go and deal with it. We're not holding a candle for this stuff. We're just simply saying it's been there for a long time."
Labour leader Andrew Little said the issue could not be swept under the carpet.
He offered to work with Government to form an inquiry on the scale of the issue and how the Government might respond to it.