Foreign trusts must be broken open

Press Release – Green Party

Revenue Minister Peter Dunne tonight endorsed tax avoidance as a legitimate practice when challenged about the use of secret New Zealand foreign trusts as a tax haven.7 September 2012

Foreign trusts must be broken open

Revenue Minister Peter Dunne tonight endorsed tax avoidance as a legitimate practice when challenged about the use of secret New Zealand foreign trusts as a tax haven.

TV3′s 60 minutes highlighted problems with the trusts and Mr Dunne responded that the behaviour was “legitimate tax avoidance”.

“Mr Dunne’s repeated reference to legitimate tax avoidance was astounding. The tax system is being undermined by the minister in charge of it,” Green Party co-leader Russel Norman said.

“New Zealand’s foreign trusts form part of a trillion dollar tax haven industry that should be transparent to help stop tax evasion.”

New Zealand’s foreign trust law allows non-residents to set up trusts here in New Zealand holding assets not liable for taxation. There are approximately 8000 foreign trusts registered with the Inland Revenue Department (IRD) holding assets estimated to be worth tens of billions of dollars. Little information is required to register a foreign trust which means ownership is effectively anonymous and assets are invisible.

“New Zealand’s foreign trusts hide billions of dollars of assets and should be broken open to help stop the global tax evasion industry,” said Dr Norman.

“We’ve become a major participant in a global tax avoidance problem due to our lax taxation laws surrounding foreign trusts.

“It’s time to demand some transparency from our foreign trust regime.”

The Law Commission reported in 2010 that our taxation rules have led to a substantial foreign trust industry in New Zealand. Our lax disclosure requirements – uncommon in the OECD – combined with our settled political and legal system ‘make New Zealand an attractive haven for offshore trusts’.

“IRD has few tools, if any, to help foreign governments pursue tax cheats,” said Dr Norman.

“IRD has such lax disclosure and reporting standards, it recently disclosed in a Parliamentary question that it doesn’t even keep records of how many governments approached them requesting information on our foreign trusts.

“We’re not pulling our weight in the global effort to fairly tax the world’s super rich.

“Tax avoidance on this scale, when you boil it down, means middle and lower-income taxpayers are having to pay more tax to cover the shortfall for the health and education services their governments are trying to provide,” Dr Norman said.

The Green Party will move to require foreign trusts in New Zealand to register and disclose more complete information on the identity of the settlors, their country of residence, related parties, and require annual financial reporting. This would enable real-time information sharing with those 37 countries New Zealand currently has double tax agreements with.

Parliamentary Question for Written Answer (#07369):
Question: How many times, if any, has the Inland Revenue Department investigated foreign trusts in New Zealand since January 1, 2007?
Minister of Revenue, Hon Peter Dunne: Inland Revenue regularly reviews the operation of foreign trusts as part of its on-going compliance activities. For example, in the course of several investigations since 2007, Inland Revenue came across some foreign trust arrangements that might have had a purpose of avoiding tax. Inland Revenue subsequently exchanged its findings with other jurisdictions under double tax agreements. Inland Revenue keeps records about its investigations in general, but the number of investigations specifically relating to foreign trusts is not recorded.

ENDS

Content Sourced from scoop.co.nz
Original url