Pressure mounts on leaders named in documents leak

  • 05/04/2016

The fallout is continuing around the world over the dump of millions of documents revealing how the rich and powerful avoid tax.

Iceland's Prime Minister is under mounting pressure to resign because of his involvement.

Tax authorities are investigating 800 Australian clients of the secretive Panamanian law firm Mossack Fonseca which helps heads of state, criminals and celebrities set up companies.

It's also been revealed British Prime Minister David Cameron's late father Ian was on the law firm's list of clients.

The documents are a blow to Cameron, a critic of tax evasion and tax avoidance.

But the government said Britain had brought in more than £2 billion from offshore tax evaders since Cameron took office in 2010 and that Britain was "leading the pack internationally" on tackling tax evasion and avoidance.

Since Britain made the issue a central plank of its G8 presidency in 2013, 90 countries have signed up to the automatic exchange of tax information, Cameron's spokeswoman said.

New Zealand's government insists the country isn't a tax haven but questions are being raised about whether the rules around foreign trusts are strong enough.

Income earned by foreigners isn't taxed here and setting up a trust is legal.

The trusts have to be registered with Inland Revenue, but that's all.

The 1.5 million leaked documents from Mossack Fonseca reveal there are more than 214,000 of those trusts and companies in more than 200 countries.

New Zealand is one of them, and the papers show Malta's energy minister Konrad Mizzi and the prime minister's chief of staff, Keith Schembri, set up two offshore trusts in New Zealand in 2015 through Mossack Fonseca.

Prime Minister John Key says New Zealand isn't a tax haven and there's no need to change tax laws.

"New Zealand has had the same tax laws when it comes to trusts since 1988, they were reviewed by the OECD [Organisation for Economic Cooperation and Development] in 2013 and they gave New Zealand a clean bill of health," he said on Monday.

"We have extensive disclosure regimes and we are signatories to a network of treaties."

But critics say foreign trusts can be used for money laundering, and Inland Revenue warned the Government in 2013 about the risks.

AUT senior lecturer in taxation Dr Ranjana Gupta says a developed country shouldn't be sheltering residents of other countries from tax or support them in evasion.

"Compared to most other OECD countries, New Zealand resident trustees of foreign trusts are not subject to detailed information disclosure and record-keeping requirements."

She says New Zealand has signed for OECD automatic exchange of financial account information, effective from September 2018, which will ensure better co-operation between countries in combating tax evasion.