Headline: IRD warned Government of foreign trust risks
Our secretive foreign trust regime has created a sizable ‘offshore trust’ industry, according to the IRD, attracting criticism and claims we have become a tax haven.
The Inland Revenue Department (IRD) has previously warned the Government of the risks foreign trusts pose to New Zealand, the Green Party said today.
A Parliamentary question lodged by the Green Party shows that the IRD briefed the Ministers of Finance and Revenue in August warning them that New Zealand’s foreign trust regime had resulted in the development of a significant ‘offshore trust’ industry here and that new laws may be necessary to protect our international reputation.
“IRD told the Ministers of Finance and Revenue that the current way New Zealand foreign trusts are being used risks our international reputation and questioned whether foreign trusts should be outlawed altogether,” said Green Party Co-leader Dr Russel Norman.
“Our secretive foreign trust regime has created a sizable ‘offshore trust’ industry, according to the IRD, attracting criticism and claims we have become a tax haven.
“Yesterday New Zealand was for the first time recognised as a tax haven by the Tax Justice Network after being added to its Financial Secrecy Index.
“The reputational risk is real and growing; New Zealand was struck off the EU ‘White List’ in 2012, adding to the cost of doing business in Europe.”
New Zealand’s current foreign trust law allows non-residents to set up trusts here in New Zealand holding assets not liable for taxation. There are approximately 8,000 foreign trusts registered with the IRD holding assets estimated to be worth tens of billions of dollars. Little information is required to register a foreign trust, which means beneficial ownership is effectively anonymous and assets are invisible.
“IRD has recommended strengthening our regulatory framework for disclosure and record-keeping around foreign trusts as one possible way forward,” Dr Norman said.
“I’ve drafted new law to address the secrecy loopholes that are being abused in the New Zealand foreign trust regime.
“Transparency is one way to ensure New Zealand foreign trusts are not being misused, but IRD may go further, after questioning their long-term sustainability in the Ministerial briefing.
“Either way, we can protect our international reputation and increase trust in New Zealand’s financial reputation by closing obvious loopholes being used to dodge taxes and facilitate crime.”
Link to IRD briefing (see page 15):
http://taxpolicy.ird.govt.nz/sites/default/files/2013-other-taxation-multinationals.pdf
Link to draft legislation to require greater disclosure of New Zealand foreign trusts:
https://www.greens.org.nz/sites/default/files/income_tax_foreign_trusts_amendment_bill.pdf
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