Former Revenue Minister Peter Dunne says there are serious questions about New Zealand's status as a so-called tax haven, even though Inland Revenue (IRD) never raised it with him in his eight years on the job.
Documents regarding New Zealand in the Panama Papers leak has convinced many New Zealand is a place for the rich to hide their wealth -- but not the Prime Minister.
Investigative journalist Nicky Hager has had a week with the Panama Papers. More than 61,000 of the 11.5 million documents set to be released online tomorrow mention New Zealand.
"What the Panama Papers show without any doubt at all, absolutely conclusively, is that New Zealand is functioning as a tax haven," says Mr Hager.
The documents show that in the past decade the number of trusts in New Zealand has exploded from 2000 to 11,000.
Mr Dunne says he's concerned the numbers have increased significantly in that time.
"That explosion inevitably raises perceptions that New Zealand is being used a tax haven, and that is not good for our international reputation.
"These revelations challenge the identity of New Zealand -- we do not want to be seen as a country that enables tax evasion."
Mr Dunne says during his time as Revenue Minister between 2005 and 2013, he can't recall IRD mentioning foreign trusts as a problem or suggesting New Zealand was becoming a tax haven.
"Was Inland Revenue not aware of what was going on, or did they genuinely perceive the issue to be unimportant?"
Prime Minister John Key says the impending release of the Panama Papers documents will not prove New Zealand is a tax haven.
"Just because Nicky Hager says it is a tax haven -- with the greatest of respect -- he is the biggest conspiracy theorist out there," he told Paul Henry on Monday.
Mr Hager hit back at Mr Key's attack, saying New Zealanders should be worried about what the documents show.
"When people use insults rather than addressing the question, it says more about them than you of course.
"I think we all find the word 'tax' boring, but actually what we're talking about is countries which have to pay for their schools, their roads, their hospitals, and what we're doing with our system here is helping to undermine those countries by being the place where people come to dodge their tax and do their dirty deeds."
Mr Hager says while foreign trusts are legal in New Zealand, the issue has become a moral one.
"I think the answer for this is very simple for New Zealand: it is a tiny part of our economy. We should close down the tax haven companies. We should stop the laws, because this does not fit our culture as a country."
He conceded there are some instances where foreign trusts do have a legitimate purpose, but mostly they are "overwhelmingly used to dodge tax and to do dodgy things".
"Why would New Zealand want to be part of that?"
Labour leader Andrew Little has called for the foreign trust industry to be shut down.
"There is nothing good in this for New Zealand. This is about helping the world's mega-wealthy avoid their tax responsibilities at a time when we're struggling to get multinational corporates to pay their fair amount of tax here."
He called Mr Key's attack of Mr Hager "desperate" and an attempt to shut the story down. The documents were worked on by a number of other journalists as well.
Mr Dunne believes New Zealand needs to continue to work with international partners to make sure they're not being used for tax evasion and money laundering.
The Government has appointed former PricewaterhouseCoopers boss John Shewan to look into the disclosure rules for New Zealand's foreign trust regime. He is set to report back next month.
Mr Dunne says New Zealand needs to do all it can to stop the tax haven label sticking.
Current Revenue Minister Michael Woodhouse maintains New Zealand's tax rules are open and transparent, and banning foreign trusts would have "unintended consequences".
New Zealand has tax agreements with around 100 countries, including in Latin America to help countries detect tax avoidance and evasion by sharing information.
"Further to this, New Zealand has complied with every information request from its treaty partners to the standard required by the OECD and was recently given the highest rating for compliance, which again shows the transparency of our system and is indicative of why we are not a tax haven.
"The Government agrees that it is important that everyone pays their fair share of tax," Mr Woodhouse says.
More than $205 million has been spent since Budget 2012 for IRD to increase its compliance work, he says.
He rubbished the idea of an outright ban on foreign trusts, saying Opposition MPs calling for it are "clearly misguided" and don't understand how they work.
"A blanket ban could have unintended consequences and lead to banning other vehicles that operate under the same principle."
Mr Woodhouse says the "real issue" is around disclosure, which the Government is open to changing.
Newshub.
