The magical disappearing Foreign Trust industry

Written By: - Date published: 9:03 am, July 6th, 2017 - 22 comments
Categories: capitalism, Globalisation, International, john key, national, same old national, tax, the praiseworthy and the pitiful - Tags: ,

What a difference a bit of sunlight makes.  New Zealand’s booming foreign trust industry has disappeared quicker than you can say “Panama Papers”.

From Radio New Zealand:

Opposition parties are claiming a major win over the government after a sharp fall in the number of foreign trusts.

Inland Revenue says it has received applications to register fewer than 3000 trusts following new rules. Photo: 123RF

At the end of last year there were about 11,750 foreign trusts in New Zealand. Following the introduction of tough new rules there are now less than 3000.

Foreign trusts came under the spotlight after millions of documents from a Panamanian law firm were leaked in 2016 showing some of the world’s richest people were using them to hide their wealth, including in New Zealand.

The government flatly rejected claims New Zealand was being used as a tax haven, but an inquiry led to the new rules being introduced in July

Now foreign trusts have to file annual returns and identify who owns the trust, what assets are in it and who the beneficiaries are.

Labour’s revenue spokesperson Michael Wood said the government did everything it could to resist having an inquiry or change the rules but was eventually forced to.

“Three-quarters of these foreign trusts completely disappeared when a very minimal amount of transparency has been required,” he said.

“Suddenly like bats exposed to the sunlight they’ve fled into a cave somewhere.

The issue has been followed by this site in considerable detail.  Without the leaking of data from a Panamanian Law Firm New Zealanders would never have known that their country was being used as a tax haven.

And the history shows the ability of the Government to claim black is white and then do complete back flips while claiming their feet have never left the ground.

Immediately after the story broke former leader John Key (remember him?) said this:

New Zealand had a robust, legitimate tax regime which required foreigners to register their trusts, he said.

“Tax havens are where there’s non-disclosure of information. New Zealand has full disclosure of information.

And this:

If you’re looking for secrecy New Zealand is the wrong place to come.”

As well as this:

A tax haven is where you don’t declare information, you can’t get information, a locked box… We have information-sharing agreements or double-tax agreements with over 100 countries” …

This statement, although technically correct was duplicitous in the extreme because  the Mossack Fonseca New Zealand agent specifically advised his clients to avoid countries with information-sharing agreements with New Zealand, presumably to side-step the disclosure system.

Then John Sherwan was commissioned to write a report and recommended sweeping changes which the Government accepted.  The focus groups must have been speaking very loudly.

Cue mass exodus of trusts afraid to actually be obligated to release information like who owns the trust, what assets are in it and who the beneficiaries are.

This whole incident shows what a line of BS we were being fed by the Government about the Panama Papers.  There was no full disclosure regime.  Requiring minimum disclosure and suddenly, as Michael Wood said, like bats exposed to the sunlight they’ve fled into a cave somewhere.

The Government has cauterised another issue that would have sapped support from it.  But eventually sufficient people will realise that National’s primary goal is to look after the 1%.  Then it will be gone.

22 comments on “The magical disappearing Foreign Trust industry”

  1. Ad 1

    And coincidentally the housing market buyers we used to have crowding the auction room floors have vanished as well!

    • savenz 1.1

      +1 Ad

      [you’ve been in moderation (which means your comments don’t appear) and haven’t responded to my requests for a response (from the Bennett issue). I’m dropping you into the ban list for a week because I need to tidy up the moderation queue and stop wasting my time on checking on what’s going on. For future reference for you or anyone, if you notice your comments not appearing over time, use the search to find your last one because there is likely a moderation note attached that you will need to respond to to get taken out of moderation. – weka]

  2. dukeofurl 2

    Im sure the ‘cottage industry’ of lawyers and accountants who support these trusts havent gone anywhere. I wonder if they have shifted the trusts to places like the Cook Islands or Niue, where they can be ‘like NZ’ but just out of the reach of our disclosure laws.
    I remember one of the advantages of NZ was the removal of the gift duty, not long back. That was the process where the secret Trust could pass funds back to original party that set them up as arms length entities completely tax free.

  3. MG 3

    but won’t someone think of the lawyers?!!

  4. Keith 4

    That this even existed was a disgrace, that and Key, mostly, toiling away in the shadows repealing things here and tinkering there and making bloody sure that NZ was a taxhaven. How to destroy our once good name for you and your rich mates!

    The involvement of Keys lawyer, who wasn’t a lawyer, who lobbied a minister, but didn’t, that put that minister on the spot who then butchered his lines that weren’t practiced on a taxhaven that wasn’t. This entire mess was 100% pure Sir John Key and it would have succeeded in the darkness of the sewer he came from were it not for a hack.

    I suspect the only reason anything changed was the likes of the EU and others very real threat of not doing business with scum like us if the status quo remained. But it was definitely worth a knighthood.

    • ropata 4.1

      +1 comment of the week ™

    • Keepcalmcarryon 4.2

      Be reasonable Keith, Key might not have been wearing the PM hat when discussing this with his non lawyer, he could have been wearing his “father of famous DJ” hat which makes it all legit. Possibly there were secret recordings of this discussion which also don’t exist.

  5. Draco T Bastard 5

    Suddenly like bats exposed to the sunlight they’ve fled into a cave somewhere.

    Should have used the word vampires rather than bats – would have been far more accurate.

    The Government has cauterised another issue that would have sapped support from it.

    No, it’s now become clear that this government knew that NZ was being used as a tax haven and tried to keep it that way. Their duplicity is now obvious and that needs to be yelled from the rooftops.

    • Red 5.1

      cant do Draco with housing shortage due to neoliberalism.roof tops are in very short supply, further more no self respecting lefty will be seen near a roof top that is not not insulated and taken advantage of government subsidy , I also suspect recent changes to oSH laws may prevent safe access to roof tops, so best to keep hammering your keyboard

  6. https://willnewzealandberight.com/2017/07/06/foreign-trusts-flee-new-zealand/

    I think it is quite telling that 75% of them have disappeared. Whilst some might have disappeared anyway, perhaps because of authorities taking action elsewhere, to suddenly have so many disappear here is a huge red flag.

  7. Philj 7

    Another day, another scandal. Wasn’t this already known, and rather predictable. Ho hum…. Collins says they disappeared because of the extra red tape, lol.

  8. Brigid 8

    Wont Wayne say something?

    • Wensleydale 8.1

      Wayne’s been around for a while, and I suspect he knows when it’s most advantageous to not say anything at all.

      Besides, when it comes to defending the indefensible, Nick Smith’s the ‘go to guy’. He does an utterly cack-handed job of it, but God loves a trier.

    • DoublePlusGood 8.2

      Too busy at his accountants’ place.

  9. Hanswurst 9

    The report was by John Shewan, not John Sherwin.

    [Thanks. Corrected – MS]

  10. taiping 10

    now one needs to approach the nil laws that apply to NZ people setting up Trusts themselves in NZ that ultimately avoid NZtax, benefit Accts and lawyers incomes and SCREW unconnected beneficiaries

  11. Pete 11

    Disappeared as quickly as a Key.

  12. Grant Henderson 12

    Just a couple of points:

    1. The author of the inquiry report was John Shewan, not John Sherwan. His report is worth reading.
    2. I don’t think foreign money was parked in NZ because of our trust laws (we get plenty of it to fuel the housing market anyway). So we were not a tax haven as is commonly known. But the way our trust taxation laws worked helped people in foreign countries dodge tax overseas, ie the NZ connection was one link in a long chain created offshore.

    The government had to act to fix that if it was to retain international credibility.

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