New Zealand has ordered an independent review of its foreign trust laws after the so-called Panama papers suggested they’re being exploited for tax avoidance.
Cabinet Monday agreed to appoint tax expert John Shewan to conduct a review of disclosure rules covering foreign trusts registered in New Zealand, Finance Minister Bill English said in a statement. "Ministers decided that in light of the ‘Panama papers’ being released last week, it’s worth looking at whether the disclosure rules are fit for purpose and whether there are practical improvements we can make," he said.
The fallout from the leaked documents from Panama-based law firm Mossack Fonseca shows no sign of abating, with U.K. Prime Minister David Cameron forced to provide more transparency over his wealth and European officials pledging measures to require companies to report their offshore bank accounts. Iceland’s prime minister has resigned and Malta’s government faces a confidence vote.
More than 11.5 million Mossack Fonseca documents were leaked detailing over 214,000 offshore companies, about half of which are domiciled in the Virgin Islands. New Zealand hosts about 12,000 foreign trusts, according to Radio New Zealand.
While Prime Minister John Key has insisted New Zealand is not a tax haven, the papers show that Mossack Fonseca bragged to clients about how weak New Zealand laws were around foreign trusts, the Australian Financial Review reported.
According to the AFR, Mossack Fonseca’s New Zealand staff reported in 2012 that: "NZ has very weak laws in regard to due diligence; they only require utility bill and passport. Trust companies are not required to hold a license."
English said New Zealand requires foreign trusts to be registered and to keep detailed financial and other records, “which can be requested by Inland Revenue and passed on to tax authorities in other countries.”
"In addition, we have a strong tax treaty network with the express purpose of
discovering and preventing tax avoidance,” he said. However, “we’re open to considering changes to disclosure rules if that is warranted.”
Shewan has been asked to report back to ministers by June 30.
More than 20 nations have announced probes into information contained in the leaks, and the Organization for Economic Cooperation and Development will host a meeting on April 13 to discuss cross-border tax issues. Global finance ministers are expected to discuss the issue when they gather this week in Washington for the International Monetary Fund’s spring meeting.