The EU and New Zealand tax transparency post Panama Papers

Following the Panama Papers release, New Zealand’s foreign trust tax laws came under intense international scrutiny. This week the European Union turned up the heat through its 65-member Panama Papers Committee of Inquiry into tax evasion and money laundering. The committee is expected to report on its findings next June, which gives New Zealand time to address what many consider to be inadequate legislation in this area.

Recent analysis by TINZ in the July Transparency Times identifies that some of these inadequacies will be addressed when recommendations from the Shewan Inquiry are implemented, but additional steps will need to be taken to ensure our tax laws promote transparency and are fit for purpose.

European Union calls for tax transparency

Below is a recap of what the EU wants, what Shewan has addressed and what is still to be done:

  1. No anonymity-trust settlers and beneficiaries are identified and changes are recorded.
    New Zealand will meet this standard when Shewan's changes are introduced.
  2. Collection of information about financial assets-where the funds came from, the current assets, where they are, and the income earned in the past year.
    New Zealand will meet this standard when Shewan's changes are introduced.
  3. No tax exemption of foreign income.
    New Zealand will NOT meet this standard even when Shewan's changes are introduced.
  4. Automatic exchange of information with foreign tax authorities in the jurisdictions where the settlers and beneficiaries are resident.
    New Zealand will NOT meet this standard even when Shewan's changes are introduced.
  5. A public register of trust ownership and details.
    New Zealand will NOT meet this standard even when Shewan's changes are introduced.

Read more at EU considers blacklisting NZ over tax laws.

Fundamental issues brought to light by the Panama Papers

As TINZ has said from the start, by limiting the Shewan review terms of reference to focus only on the Foreign Trust Disclosure Rules, the Inquiry failed to address a number of fundamental issues brought to light by the Panama Papers.

The transparency of all corporate vehicles, not just foreign trusts, is essential to prevent and detect serious crimes such as money laundering, tax evasion and corruption–this includes both trusts and companies. Countries and NGOs globally are discussing strategies to combat the misuse of trusts and companies.

New Zealand has committed to implement the standards set by the Financial Action Task Force (FATF) and Organisation of Economic Development (OECD).

These include measures for corporate transparency. For example:

TINZ said previously that the Inquiry will have a material impact on the future of New Zealand's standing in the world and on our collective prosperity. Recent European Union actions go even further than was envisaged when TINZ advised the Shewan Inquiry to dig deeper in its May submission.

Early in May British Prime Minister David Cameron hosted an Anti-Corruption Summit in London to step up global action to expose, punish and drive out corruption in all walks of life. New Zealand Prime Minister John Key was represented by Police Minister Judith Collins

“We have made a number of commitments which build on the work New Zealand has done in recent years and will help to maintain our reputation as one of the least corrupt countries in the world,” said Minister Collins.

The table below outlines an updated assessment of New Zealand's comparatively modest commitments.

TINZ continues to push to make New Zealand inhospitable to corruption

The Shewan Inquiry recommendations are a step in the right direction. They have a significant potential to impact on New Zealand's reputation. There is still much to do though, especially if New Zealand wants to stay ahead of the pack.

TINZ recommendations in regards to the Shewan inquiry continue to be:

  • The New Zealand AML/CFT Act (2009) should be extended to cover all professionals, including lawyers and accountants that are engaged in setting up New Zealand corporate vehicles. The next step is to ensure the Shewan recommendations on the AML are implemented as quickly as possible.
  • New Zealand should establish a corporate registry that includes beneficial ownership of relevant corporate to enable review and audit by law enforcement and compliance bodies.
  • The entity operating the corporate registry should be adequately resourced and funded to be effective.
  • New Zealand should equally ensure similar transparency of trusts to understand the ultimate beneficial owners. To achieve this, New Zealand should consider establishing a similar registry for trusts.


Recent Activity

Protect our whistleblowers
Transparency International New Zealand (TINZ) is calls for better whistleblower protection. 8 Aug, 2017

Auditor General resignation requires transparency
Transparency International New Zealand (TINZ) calls on Parliament to release the report by Sir Maarten Wevers that lead to the resignation of Auditor-General Martin Matthews. 5 Aug, 2017

TINZ applauds decline in foreign trusts
Government implementation of tougher disclosure requirements for foreign trusts have led to around 75% discontinuing or exiting New Zealand. 9 Jul, 2017

Public Sector Integrity Media Release
State Services Commission took a very positive step in addressing a key recommendation of TINZ's Integrity Plus 2013 New Zealand National Integrity System Assessment by advertising a role for Deputy Commissioner, Integrity, Ethics and Standards. 11 May, 2017

Corruption Perceptions Index 2016 TINZ media release
Transparency International 25 Jan, 2017