New Zealand government hits back as "tax haven" allegations mount

The New Zealand government was forced to defend its tax and trust regimes Monday amid increasing claims that the country was operating as an international tax haven.

Last month the government announced that a tax expert had been appointed to review the country's relatively lax foreign trust disclosure rules amid claims that wealthy foreigners were using foreign trusts to evade taxes in their home countries or to obscure ill-gotten gains.

However, that was followed by revelations last week that Prime Minister John Key's personal lawyer had lobbied for the foreign trust industry and new disclosures Monday that the country played a key part in global tax avoidance.

On Monday, Internal Affairs Minister Peter Dunne -- who was Revenue Minister from 2005 to 2013 -- said he was concerned at the revelation that the numbers of foreign trusts established in New Zealand had gone up almost four-fold in the last decade.

"That explosion inevitably raises perceptions that New Zealand is being used a tax haven, and that is not good for our international reputation," Dunne said in a statement.

Dunne, whose United Future Party is a minor support party in the government, said New Zealand needed to do all it could to avoid the label of tax haven from sticking.

New Zealand needed to continue to work with international partners to develop robust and transparent rules for the operation of foreign trusts internationally, to ensure they were not vehicles for illegal or criminal tax evasion and money-laundering, said Dunne.

At the same time, New Zealand clearly needed to review its own disclosure rules to identify who the trusts comprised and where they should properly be taxed, and to broaden its network of tax information exchange agreements in particular, he added.

The government needed to start a much more comprehensive inquiry into allegations that New Zealand was becoming "a destination of choice for ultra-wealthy people seeking to avoid paying tax in their home countries," the opposition Green Party said.

"This is about what's right for New Zealand as a responsible global citizen. We shouldn't be allowing our good name to be tainted by global tax dodgers who are cashing in on our high ranking in international transparency indexes," Green Party finance spokesperson Julie Anne Genter said in a statement.

However, Revenue Minister Michael Woodhouse hit back, claiming calls to ban foreign trusts were "clearly misguided" and lacked understanding of their construction.

"New Zealand has an extensive network of tax treaties and information exchange agreements, which are at the heart of a transparent tax system," Woodhouse said in a statement.

"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 would wait and see what comes from the review, but it was open to changes that might be recommended around disclosure rules of foreign trusts, he said.

Critics claim that New Zealand foreign trusts enable tax avoidance because they have no requirement to disclose either the trust beneficiaries or the source of assets. Endit