1800 foreign trusts to get out of NZ

More than 1800 foreign trusts have told Inland Revenue they don’t want to register under new rules that require them to reveal financial information and their ultimate owners.

New Zealand’s foreign trust industry came under the spotlight last year in the wake of the Panama Papers — a cache of 11.5 million documents leaked from Panamanian law firm Mossack Fonseca.

This document trove, according to the group of journalists that analysed it, allegedly showed New Zealand was being used as a tax haven and raised questions over whether this country’s foreign trust industry was open to abuse.

The tax haven contention was rejected by former PwC partner John Shewan, who was commissioned to review trust disclosure laws.

Shewan said in his subsequent report that New Zealand was not a tax haven but the disclosure rules for foreign trusts were “not fit for purpose” and “light- handed”.

The Government adopted Shewan’s recommendations and earlier this year introduced rules requiring people setting up or administering foreign trusts in New Zealand to reveal financial information and the identity of any beneficiaries.

The new regime requires all trusts to register with Inland Revenue by June 30.

These trusts, according to an Inland Revenue spokesman, must indicate whether they are going to stay registered in New Zealand and comply with the extra requirements.

Of the 11,750 foreign trusts in existence before the new rules were passed in Febru- ary, only 66 had so far informed IRD they plan to register.

As at Thursday afternoon, 1838 had told the tax department they are not going to register under the new regime. These trusts will no longer be able to operate as a result.

The spokesman said the “numbers are changing by the hour and will continue to do so right up until the deadline”.

“Obviously it’s taking time for the industry to complete the extra requirements and officials here are providing support when they can,” he said.

Green Party leader James Shaw yesterday questioned why the Government had taken so long to take action against foreign trusts.

Shaw said: “Holding foreign trusts to higher disclosure requirements will improve our international reputation, which is worth way more to us than the small industry that serviced them here in New Zealand.”