For months now we have been hearing about the Panama papers that were leaked from the offices of a legal firm. In them New Zealand was mentioned thousands of times. Not surprisingly the Opposition in Parliament were quick to jump on the Government and rightfully so, trying to make the case that New Zealand is a tax haven.
Against a backdrop of growing inequality, with public sentiment moving against tax evasion, the Government is trying to give the impression there is no problem. Prime Minister John Key insisted that there would not be any reform of tax evasion laws and may use the review of the report into allegations of New Zealand being sympathetic to tax evasion to advance his case. That report written by former PriceWaterhouseCooper Chairman John Shewan found no serious evidence of New Zealand being a tax haven, though he said that the disclosure laws are not good enough.
However it also found that the term “Tax Haven” is viewed as obsolete by the Organization for Economic Co-operation and Development. And Mr Shewan pointed to the significant debate about whether New Zealand should be labelled one as a useful illustration of the reasons for the O.E.C.D. view of the term. Mr Shewan’s report made numerous recommendations, the major ones being:
- Establishing a register of foreign trusts searchable by regulatory agencies
- Trust beneficiaries be declared
Although the Government appears to come out relatively unscathed on the foreign trusts issue so far, it needs to implement all of the recommendations before the 2017 election to have true credibility. It needs to aggressively pursue money laundering and offer to help South Pacific nations whose legal systems are not so robust with resourcing. As I have mentioned in previous posts the penalties for money laundering are nowhere near high enough, not only in terms of severity but also in terms of preventing individuals carrying out further such acts in the future. Whistle blowers who notify the authorities of illegal happenings also need to be granted protection – this is a separate issue in that whistle blowers are covered by separate legislation, but relevant because not being protected increases the risk of abuse.