Sensible recommendations on foreign trust disclosure rules
Sensible recommendations on foreign trust disclosure rules welcomed
Chartered Accountants Australia and New Zealand (CA ANZ) today welcomed the release of tax expert John Shewan’s report to the Government inquiry into the foreign trust disclosure rules.
The Shewan report recommends that the current disclosure rules be strengthened significantly by requiring foreign trusts to register and to disclose details of the settlor(s), non-resident trustees and others who control the trust, and some categories of beneficiary.
Sensibly Shewan has not recommended any changes to the rules for taxing foreign trusts, which “follow New Zealand’s long established and principled policy of not imposing tax on foreign source income derived by non-residents”.
In its submission to the inquiry, CA ANZ noted that “there is a risk that New Zealand’s reputation as a country that co-operates with other jurisdictions to deter abusive tax practices could be compromised by the current foreign trust disclosure rules.
“This is principally because the rules require the automatic disclosure of very limited information only (the name of the trust, the identity of the trustees and, if relevant, the trustees’ membership of an approved organisation), which could be perceived as being inadequate.”
The CA ANZ submission says there has been a shift in attitudes to disclosure of information and tax secrecy since 2006. CA ANZ believes that many governments and much of the public now appear to have an increasing expectation of higher degrees of tax transparency.
However, the submission makes the point that the OECD regards New Zealand as an exceptional ‘exchange of information’ partner.
It also says the Inquiry should be “mindful that most trusts are set up for genuine purposes, such as philanthropy, inheritance, the protection of vulnerable people and the support of family members.
CA ANZ describes New Zealand’s rules for taxing trusts as “principled, fit for purpose and appropriate. CA ANZ did not support any change to the settlor-based approach to taxing trusts.
“The focus of the Inquiry is appropriately on the disclosure rules that apply to foreign trusts and not on the substantive tax rules that apply to the taxation of trusts.”