Rachel Smalley: NZ just a cog in tax avoidance wheel

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Are we a tax haven? Do the foreign trusts that are held here meet the requirements to make us a tax haven? Well, it depends how you define it.

I'm going to use the OECD definition of a tax haven.

If the company pays little or no tax on its income...

If it doesn't really do any business...

If it's not clear what the nature of the company is or who owns it....

And if there is no information flowing back and forth to the tax authority (and this would describe a whole chunk of foreign trusts held here), then that makes us a tax haven.

In saying that, we're not unique. New Zealand is just another cog in the tax avoidance wheel and our strong, secure tax system and our political stability makes us a safe and attractive option.

Labour says this is hurting our global reputation - our upstanding reputation that we're transparent, and all-but free of corruption. I disagree.

I don't think our reputation has taken a hit because of this. Everybody's at it. The question is, what do we do about it? And are we comfortable with it?

There is nothing illegal about the practice or the way a foreign trust is structured. Some are simply legitimate vehicles to help an individual or company avoid paying tax.

But the reality is that some are used for money-laundering, for siphoning and transferring funds gained through illegal activity. Gains are made through crime and corruption, human trafficking and arms dealing. And because there's no transparency, we're completely in the dark.

And how does that sit with you? We, and many other countries, are potentially parking that money within our shores. No questions asked. No transparency. No requirement to reveal anything to the IRD.

The biggest issue for me is that foreign trusts don't come without a cost. Don't kid yourself by thinking no-one loses from this. Millions lose. If people don't pay tax, economies suffer.

Remember Oxfam's recent report which revealed the impact of tax avoidance on the third world? Think about Africa. Think about Latin America. Think about the corrupt practices going on all over those continents. The resources that are being plundered. Oil, diamonds, precious metals, etc.

The huge profits that don't stay within those third world countries. That money is siphoned off into offshore accounts, hidden in foreign trusts. Meanwhile, the famines continue. And Africa continues its rapid decline.

Not our problem, you say. Park your money here. Sure, it's not illegal - but why should some of us pay tax, and others don't?

New Zealand foreign trusts don't need to be registered, audited and you can keep the identities of those involved, hidden.

The question is, are you comfortable with that? Or should we, as a country, insist on greater transparency? Or do we just fall into line, like sheep, with every other tax regime that's being exploited?

Debate on this article is now closed.