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Law changes to shed light on New Zealand's murky foreign trusts

Xinhua, August 8, 2016 Adjust font size:

The New Zealand government on Monday tabled law changes to tighten its lax foreign trust rules and ensure they share tax information.

Revenue Minister Michael Woodhouse said the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill tabled in Parliament included measures to strengthen and update New Zealand's international tax rules with new disclosure requirements for foreign trusts.

It proposed to introduce a register that is searchable by the Department of Internal Affairs and the Police, as well as annual disclosure requirements, Woodhouse said in a statement.

The changes followed an inquiry by an independent tax expert, which concluded last month that there was "a reasonable likelihood" that New Zealand's foreign trust regime "is facilitating the hiding of funds or evasion of tax in some instances."

"The rules are not fit for purpose in the context of preserving New Zealand's reputation as a country that cooperates with other jurisdictions to counter money laundering and aggressive tax practices," said the inquiry report.

Woodhouse said the government was committed to moving quickly on the changes to foreign trust disclosure rules and the inclusion of the changes in the Bill reflected that.

The Bill also included the necessary measures to implement the G20/OECD (Organisation for Economic Co-operation and Development) standard for the automatic exchange of information, which New Zealand financial institutions would have to comply with, he said.

The government launched the inquiry into foreign trusts in April amid claims that wealthy foreigners were using foreign trusts to evade taxes in their home countries or to obscure ill-gotten gains.

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

The report recommended a significant increase in the information disclosed when a foreign trust sets up, including naming foreign trustees, along with annual reports with details of settlors, beneficiaries, and full financial statements, and increased enforcement to deter foreigners looking to use New Zealand foreign trusts "for illicit purposes." Endit