Remember the Panama Papers – What happened?

Brendon Wilson TINZ Director

by Brendon Wilson

TINZ Director

Writing for Employers and Manufacturers Association

BusinessPlus Magazine – August 2017

Editor’s Note This article is particularly timely in light of the recent murder of journalist Daphne Caruana Galizia in Malta and the release of the Paradise Papers

Following the Panama Papers leak -a whistleblowing event of heroic proportions- to a world audience in 2016, New Zealand was named as a desired destination for foreign trusts, suspected of potentially hiding funds from tax and other agencies. In these trusts the true owner of the assets was not identified and could not be discovered, so New Zealand was rightly or wrongly seen by many as complicit in helping to protect money launderers and tax evaders.

Following widespread concern which gathered business and public support, including strong advocacy from Transparency International New Zealand (TINZ), a previously uninterested NZ government appointed world-recognised tax figure John Shewan to conduct an inquiry. The resulting Shewan Report found that ‘there is a reasonable likelihood that the regime is facilitating the hiding of funds or evasion of tax’. To its credit, the Government codified many of his recommendations, into law which became effective in February, with a compliance deadline of 1 July 2017.

The resulting more rigorous requirements for foreign trusts has produced a significant drop in registrations. Where there were 11,675 registered foreign trusts in April last year, at the 1 July deadline only 3,000 have registered under the new disclosure laws.

Of the trusts who have not re-registered – and so are now unable to operate legally in New Zealand – some 3,000 have indicated to Inland Revenue Department that they will no longer be registering. The IRD has yet to hear from the remaining 5,000.

“By adding tougher disclosure requirements, New Zealand sent a strong signal that we will no longer tolerate being a conduit for corrupt money and property purchases,” says Suzanne Snively, Chair of Transparency International New Zealand. “The sharp decline in registrations strongly suggests that there are a number of foreign trusts involved in activities that couldn’t stand scrutiny.”

By any measure, the sheer logic of these new registration numbers indicates a large number moving away to avoid the disclosure the new law requires. There is no need – or way – to enquire further into the background of these departed trusts, except to commiserate that many will probably find another anonymous home – but not in New Zealand.

The new law did not establish a centralised register of beneficial ownership of companies and trusts, open and available to all reporting entities. This would promote greater transparency and public confidence, and would be consistent with the Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act. It is still a worthy objective.

Preventing the use of New Zealand’s reputation to legitimise ill-gotten funds is a vital part of the effort to achieve a transparent and corruption-free New Zealand – a major TINZ goal.

Has the new law improved the New Zealand financial landscape and international reputation? We think so.

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