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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.
Below is a recap of what the EU wants, what Shewan has addressed and what is still to be done:
Read more at newshub.co.nz: EU considers blacklisting NZ over tax laws.
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.
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: