No Legitimate Reason for Secretive New Zealand Trusts
No Legitimate Reason for Secretive New Zealand Trusts: Tax Justice Network
New Zealand’s secretive global trusts have no reason for remaining as secretive as they do, and global momentum will force New Zealand to open them up and run them more transparently, according to a UK-based Tax Justice Network spokesperson.
John Christensen told Corin Dann on Q+A this morning that our Government’s argument – that New Zealand’s not a tax haven, and does co-operate with other tax regimes through a network of agreements with other countries - is not valid.
“In my opinion, these tax-information-exchange agreements and double-tax agreements are pretty useless,” he said.
“And we've seen that across the world. They're useless because they only work on the on-request model. That is if a tax authority elsewhere gets wind of the fact that someone might have a trust in New Zealand, then the courts might permit information exchange. That simply isn't good enough.
“We now need to move to a new era of automatic information exchange where the trustees of a trust based in New Zealand will automatically inform the tax authorities, who will pass that information on to the tax authorities in the third-party country.
“I'm afraid the existing tax information exchange agreements are worthless,” he said.
Q + A
Interviewed by CORIN DANN
JOHN We now have evidence on a compelling scale that the rich elites and the powerful politicians are involved in high-level— not just tax evasion and tax avoidance, but also high-level criminality of a very wide range — market rigging and insider trading, embezzlement. There's all sorts of crimes hidden behind these tax-haven structures. And I think the public are furious, not just because of the cuts in public services and the higher taxes they're paying, but also because of the evidence of corruption at such high level.
CORIN If we could look at David Cameron's case, he, I see, argues that the vehicle — the company — that was set up by his father was not designed to avoid tax. Is that not being accepted by people?
JOHN No, absolutely not. I don't accept it myself, I'm sorry. He hasn't made a compelling case so far. You know, the evidence suggests that this company was set up explicitly to avoid paying tax, and worse, because it's been so secretive, because so many of its clients are using offshore, it's more than likely many of the clients of Blairmore were in fact evading tax as well. So we won't know about the tax avoidance side until such time as there's been full disclosure, and Parliamentarians here in Britain are now calling for a full review of the entire situation. It's very possible that eventually these tax avoidance structures will be proven to be illegal, not legal.
CORIN But as they stand at the moment, they're not illegal. You've been looking at these issues for a number of years now. Can you explain to me what are the reasons for setting up a tax or foreign trust somewhere? Is there any legitimate reasons in your mind? Because there are tax experts that argue that these are a perfectly valid vehicle in some instances.
JOHN Yes, there's no question about it. No one's going to argue that offshore trusts and offshore companies have no legitimate purpose. Many of them are set up to help cross-border investment flows, and I think most of us would think that's a very good thing. The problem lies with the fact that so many of them are shrouded in secrecy. We don't know the ownership of the offshore companies. We don't know the beneficial ownership or who benefits from the offshore trust. And behind that secrecy— or that secrecy creates a veil behind which all sorts of, all types of crimes, including, of course, tax evasion, but other crimes can happen behind these shrouds of secrecy. What's needed, of course, is much a much greater degree of transparency around offshore companies. G20 has committed to requiring transparency, full disclosure on public registry of the offshore trusts, but they haven't delivered on that yet. And Prime Minister Cameron, who's promised that this will happen and will be extended to all of the British tax havens, hasn't delivered on that promise either. Same thing, unfortunately, there isn't a strong enough framework at the moment for information exchange between tax authorities, and that degree of secrecy creates an environment in which tax evaders, sadly, can get away an awful lot of shenanigans, and that is a global problem.
CORIN Is it a problem, do you think, that New Zealand, an OECD country, appears to have — or does have — a regime in which there is a level of secrecy that is afforded to those who set up trusts?
JOHN Yes, absolutely. The New Zealand trust is clearly a vehicle of secrecy. There is no legitimate case for having that secrecy. I'm afraid the whole trust industry is now going to have to accept that if they are to play a useful and legitimate part in the global economy, they're going to have to be a great deal more open and transparent and will have to engage in information-exchange processes. And trustees in New Zealand will have to become used to the idea that they have a responsibility to assist with information exchange purposes.
CORIN Well, the government here—
JOHN So if they have—
CORIN I was just going to say if the government here has been consistently arguing this week that they're not a tax haven, and that they do cooperate with other tax regimes. There's 40, you know, double-tax agreements. Is that not enough? That they will, if they are asked by a country, provide the details?
JOHN No. Yeah, no, I'm sorry, in my opinion, these tax-information-exchange agreements and double-tax agreements are pretty useless. And we've seen that across the world. They're useless because they only work on the on-request model. That is if a tax authority elsewhere gets wind of the fact that someone might have a trust in New Zealand, then the courts might permit information exchange. That simply isn't good enough. We now need to move to a new era of automatic information exchange where the trustees of a trust based in New Zealand will automatically inform the tax authorities, who will pass that information on to the tax authorities in the third-party country. No, I'm afraid the existing tax information exchange agreements are worthless.
CORIN Given that, is there a risk to New Zealand’s reputation that if it is seen to not be doing enough, it will start get a bit of a black mark?
JOHN Well, I'm afraid already there has been that reputational harm. Happily for New Zealand, it isn't a huge player. It's not very high up on the financial secrecy index rankings. It isn't nearly as big a player, or frankly as toxic, as somewhere like the British Virgin Islands. The British Virgin Islands is very much more secretive. But nonetheless, we kind of look to New Zealand as a place where you have responsible government, cooperative government. It's a place which we'd like to think has great integrity, and this is an area where there's a great deal of room for improvement.
CORIN So you would expect countries like New Zealand to come under pressure if there is some sort of a global push for a new rules system that's set up here. Something I know Barack Obama was talking about.
JOHN Yep, absolutely. The weakness lies with the trust and the lack of transparency and information exchange around trusts, and that's precisely where there's room for improvement. There will be pressure. There's no doubt about it. Civil society pressure on this globally has been building up in the last 10 years. There is a huge momentum for change, not just coming from Barack Obama but also from across Europe and elsewhere. African government leaders are now calling for change; Latin American government leaders are calling for change. But above all, it's civil society that's leading the way here. It's the global Tax Justice Network that's been pushing for this change, precisely because too many of the political elites are themselves involved in these shenanigans. And that, I think, is what's so important about the Panamanian papers leaks — it's shown that too many politicians are involved.