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Saturday
Oct152016

Foreign Trusts Amendments Close!

Stuff Business for 5 October contains a interesting, if deservedly cynical article by Neil Chenoweth on the progress of the foreign trusts legislation making its way through Select Committee - it should be out by November, and enacted for the New Year. He claims that the trust firms most affeccted have succeeded in having it '"watered-down." That remains to be seen, but certainly there has been every indication of moves in that direction. 

What was evident in the 'soft-shoe shuffling' that took place following the release of the Shewaan Report was that whilwe "accepting almost all" of the Shewan's recommendations, Key clearly wanted amendments that would neither 'scare the horses' of overseas investors who value the 'safety' of New Zealand, nor constitute a weapon with which the Opposition could soundly beat them on the floor of Parliament. Here is the conclusion of Chenoweths article:

"Shewan handed in his report at the end of June, concluding the laws were inadequate: "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."

He cited the government's policy of encouraging foreign investment, though as foreign trusts are specifically barred from investing in New Zealand this appears to have been tongue in cheek.

"It's important to note the review that noted that foreign trusts are legitimate vehicles and that New Zealand's tax treatment of foreign trusts is appropriate," a spokeswoman for Key told the Financial Review.

The new laws before parliament are largely in line with Shewan's recommendations and will require foreign trusts to file with the Inland Revenue Department extensive details of beneficiaries, settlors and assets when a foreign trust is set up and yearly updates on distributions.

The NZ Police Commissioner will have access to the records, as will the Inland Revenue Department (IRD). But no one else will. Tax treaty partners can only get access to the records if they ask for them.

That is, a country like the United States can only ask who is behind a foreign trust if the US already knows the answer. That's little change from the current position, comparable with the information exchanges offered by the Caymans or Bermuda.

At least the government will not be caught flatfooted again, unable to respond to leaks like the Panama Papers.

How well the new rules will safeguard New Zealand's reputation is yet to be seen, but it's a shot in the arm for that other critical measure: it will be marvellous for protecting the reputation of politicians."

 

 


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