Shewan report on foreign trusts wins over sceptics
Massey University tax lecturer Deborah Russell says a review of New Zealand's foreign trust rules has delivered "exactly the outcome we needed" to fix our damaged reputation.
New Zealand was singled out as a tax haven in the Panama Papers leak in April because of the secrecy surrounding foreign trusts. At the time Dr Russell said the Government's response -- a review headed by former PricewaterhouseCoopers chairman John Shewan -- would be "a bit of a cover-up" that would achieve nothing.
She wasn't the only sceptic, with Labour leader Andrew Little saying Mr Shewan "simply is not the kind of person which international commentariat would have any confidence in at all, nor do I", and New Zealand First leader Winston Peters questioning his independence.
But Mr Shewan's report, released on Monday, gave New Zealand's trust laws a fail grade. He said it was likely "that illicit funds are being hidden in New Zealand foreign trusts", that "existing foreign trust disclosure rules are inadequate" and recommended disclosure arrangements should be strengthened.
"He said our laws aren't good enough and we do need to fix them, which is interesting because a few months ago the Prime Minister was saying 'nothing to see here, move along'," Dr Russell told Paul Henry on Tuesday.
"Well, clearly there is something to see. I think the response now is completely appropriate."
Prime Minister John Key on Monday said Mr Shewan's recommendations are "sensible and well-reasoned", and will be considered as a part of wider changes expected to be announced in July.
"If Mr Shewan's recommendations go through, trusts when they're formed will have to register with IRD," says Dr Russell.
"Every trust, every foreign trust will have to file annual financial statements and the names of beneficiaries and their tax ID numbers as well. That's a whole lot more disclosure."
Deborah Russell on Paul Henry
Inland Revenue will also be able to share the information with tax authorities overseas, ensuring people aren't avoiding paying their fair share. At least, that's the goal.
"Tax lawyers are very, very clever people, and I'm sure they'll find ways around the law," says Dr Russell, "but it's pretty good what's being asked for, and I think it does the best we can to shine some sunlight into what was a very murky area of the law for us, and where we kind of got into trouble."
Labour has also changed its tune, praising Mr Shewan's work as a "rebuke" to the Government.
"Labour supports the improved disclosure and transparency recommendations of the Shewan report. These will make for a system that is more open and will give foreign governments greater ability to track down those who are avoiding their tax obligations."
The Greens also welcomed the report, while Mr Peters said it only told us "what we already know".