WELLINGTON: New Zealand said on Wednesday it will introduce a registry of foreign trusts that local tax and law enforcement agencies could use to investigate suspected money laundering and tax evasion.
The registry was recommended after an independent review by accountant John Shewan last month, in the wake of the Panama Papers revelations, who found the trusts were open to being used to hide illicit funds and tax abuse.
Professional trust formation agents and lawyers were waiting to see whether the ramped-up disclosure rules would scare off foreign clients who had favoured the trusts for their secrecy.
New Zealand has long been identified as offering a trust regime popular with the offshore trust business. The tax department recommended a review of taxation of foreign trusts in 2014, though this did not take place at the time.
Finance Minister Bill English said the register would “ensure that our foreign trust disclosure rules are strengthened and New Zealand’s reputation is protected.”
The government will introduce a bill to Parliament in August, requiring the Inland Revenue Department (IR) to establish the registry.
Those setting up trusts would have to provide the names, contact details, and tax identification numbers of the settlors and beneficiaries of foreign trusts.
“Until we see the bill implementing automatic exchange of information there is a concerning lack of clarity about who will be able to access the proposed register of foreign trusts,” said David McLay, a Wellington-based lawyer who specialises in tax law and trust formation.
“Until we resolve that lack of clarity we cannot answer the question of whether there will be a loss of trusts from New Zealand.”
Wellington is currently considering how it would implement rules on exchanging tax details with other countries under the G20-led automatic exchange of information, a global standard to crack down on offshore tax evasion.
Currently, New Zealand’s tax department could only access information about foreign trusts on request. It has said that it would not entertain “fishing requests” by foreign governments for information.
There had been 142 exchanges of information between IRD and foreign tax authorities in 23 countries in the past seven years, Shewan’s report said.
New Zealand trusts could bring in as much as NZ$50 million in fees a year, with almost 12,000 foreign trusts costing around NZ$4,000 in annual fees, according to lawyers. The value of the trusts is not known.
