Closing the door on tax havens
A Massey University taxation specialist says New Zealand's involvement in international tax avoidance is shameful, but could be easily fixed.
The leak of thousands of documents from the Panamanian law firm Mossack Fonseca has focused attention on the role New Zealand plays as an international tax haven.
Taxation specialist Dr Deborah Russell says it's shameful for New Zealand to be caught up in international tax avoidance.
She says while there is nothing illegal about minimising tax, there are ethical implications.
"Very wealthy people and companies who use extreme measures to minimise their tax are free riding on ordinary taxpayers."
Dr Russell says there is a loophole in the law that has allowed foreign citizens to use New Zealand as a tax haven.
She told RadioLive's James Coleman the only people who can use the loophole are foreign citizens, not New Zealanders.
"They can park money in a trust, which has a trustee here in New Zealand, and then the income on it doesn't get declared in their own countries because of their country's law, and it doesn't get declared in New Zealand because of New Zealand's law. So the income becomes tax free income."
Dr Russell says the only information the Government collects are the names of the trustees and the name of the trust.
She says the law should be rewritten so that IRD can collect the names of the people who have placed assets in their trusts and also the names of the beneficiaries of the trusts. It would then be able to pass this information to other countries' tax authorities.
The law has been on the books for a couple of decades. But Dr Russell says since 2009 local law firms and tax consultancies have been advertising their services, promoting the use of the loophole to offshore investors.
She estimates that local firms have collected about twenty million dollars in fees from offering advice to foreign investors on how to take advantage of the loophole in the New Zealand tax laws.