New light on trusts wel­come

The Dominion Post - - Opinion -

Tax ex­pert John She­wan has pro­duced a lu­cid in­quiry into New Zealand’s for­eign trust regime. Strik­ingly, it con­firms the sus­pi­cions thrown up by the Panama Pa­pers scan­dal.

‘‘There is a rea­son­able like­li­hood that the regime is fa­cil­i­tat­ing the hid­ing of funds or eva­sion of tax,’’ She­wan says.

For­get the se­man­tic dis­putes about whether the coun­try is tech­ni­cally a tax haven – this was al­ways the main ob­jec­tion to the regime, and it is what mat­ters most. It means that New Zealand’s rules are ripe for abuse. It means that the coun­try has pro­vided an av­enue for crim­i­nal­ity, and likely made it­self party to a shame­ful global pan­demic of tax avoid­ance.

It is also an indictment on the Gov­ern­ment for its sunny as­sur­ances that the for­eign trust regime was sound, and even ‘‘world class’’.

It isn’t, and She­wan, no high-tax evan­ge­list, care­fully ex­plains why – from ‘‘ab­so­lutely min­i­mal’’ dis­clo­sure re­quire­ments for those want­ing to set up a trust here, to the like­li­hood that no gov­ern­ment agency will ever take a look at their records.

In­struc­tively, She­wan also out­lines how Aus­tralia’s con­cerns over the trust regime’s ap­par­ent use for tax avoid­ance were han­dled: from 2006, New Zealand be­gan au­to­mat­i­cally in­form­ing Aus­tralia when its cit­i­zens set up a trust here.

While the over­all num­ber of for­eign trusts has grown five times as large since then, ‘‘there is now vir­tu­ally no par­tic­i­pa­tion in for­eign trusts from Aus­tralia’’, She­wan re­ports. That says it all.

In­for­ma­tion and trans­parency, then, are the an­swer. The Gov­ern­ment has never given a good rea­son why those who use New Zealand’s trust law purely as a ve­hi­cle for mov­ing wealth around over­seas should not have to ex­plain who they are.

If She­wan’s rec­om­men­da­tions are adopted, they will have to do so – Prime Min­is­ter John Key was plain wrong to in­sist in Par­lia­ment this week that there would be no sig­nif­i­cant in­crease in dis­clo­sure re­quire­ments.

The Gov­ern­ment’s lethargy on this is­sue was in­ex­cus­able – af­ter the Aus­tralian ex­pe­ri­ence, af­ter IRD warn­ings, and af­ter grow­ing global ef­forts to con­front tax cheats. If the rea­son was to pla­cate a cot­tage in­dus­try of trust lawyers, in­clud­ing the prime min­is­ter’s old friend and per­sonal lawyer Ken Whit­ney (whose as­sid­u­ous lob­by­ing on the mat­ter was one more alarm­ing el­e­ment to this story), that is deeply wor­ry­ing. If it was sim­ply an aver­sion to med­dling with the cross-bor­der trans­ac­tions of the megawealthy, that is scarcely any bet­ter.

It took an in­ter­na­tional scan­dal to fi­nally force ac­tion. The heat from the Panama Pa­pers led to the She­wan in­quiry and the likely new rules. They should have been en­acted long be­fore the scan­dal broke.

Lastly, She­wan floats but then dis­misses one more means of deter­ring ‘‘ag­gres­sive tax plan­ning’’ – a pub­lic reg­is­ter of for­eign trusts. In­stead, he opts for a ver­sion search­able only by gov­ern­ment agen­cies.

Here he has too much re­gard for the pri­vacy of wealthy for­eign­ers. Those who want to use New Zealand’s law for com­plex and re­mote pur­poses of their own, even to ‘‘man­age fam­ily wealth’’, whatever that might mean, should accept trans­parency as the price for the priv­i­lege.

It took an in­ter­na­tional scan­dal to force ac­tion.

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.