Loopholes in New Zealand’s trust law, highlighted by the so-called ‘Panama Papers’ makes this country complicit in schemes to avoid tax.
The massive document leak from Panamanian law firm Mossack Fonseca sheds light on New Zealand’s role as an international tax haven.
It is shameful for New Zealand to be caught up in international tax avoidance.
The loophole in our laws that allows New Zealand foreign trusts to escape taxation has been known about for years, but nothing has been done to shut it down. This makes us complicit in schemes to avoid tax.
While there is nothing illegal about minimising tax, there can be ethical implications.
Taxation is the price of civilisation, and very wealthy people and companies who use extreme measures to minimise their tax are free riding on ordinary taxpayers.
I believe that it would be comparatively easy to shut the loophole down.
The loophole relies on New Zealand tax authorities not collecting and sharing basic information about foreign trusts.
Trustees of New Zealand foreign trusts should be required to disclose the identities of the people putting property into the trusts, and benefitting from the trusts, and Inland Revenue should be authorised to share this information with other countries’ tax authorities.
This would enable other countries to pursue people who are sheltering property and income in New Zealand foreign trusts.
The only people in New Zealand who benefit from the foreign trusts loopholes are the tax consultants and trustee companies collecting fees from providing trustee services.
Shutting down the loophole might reduce these fees, but it would also restore New Zealand’s reputation for being corruption free.
Dr Deborah Russell is a Taxation Specialist at Massey Universitty School of Accountancy. Picture Courtesy: Massey News.