Tax experts pleased with changes to foreign trust laws, despite some secrecy

Tax experts say it will take time to view the effectiveness of changes to foreign trusts implemented from the Shewan report.

In a major change in position the government is now agreeing to implement a raft of changes designed to keep trusts in check. Source: 1 NEWS

New Zealand's role in helping the world's wealthy hide funds from tax laws was exposed when the Panama Papers scandal broke in April.

Now, the New Zealand Government, after denying several times the country was a tax haven, is moving to adopt all the recommendations from the Shewan report, an urgent review of foreign trust disclosure rules.

"The impact it has on the foreign trust industry will tell us to what extent the foreign trust industry was being used for improper purposes," PWC tax consultant Geof Nightingale said.

Accountant Bruce Sheppard, who has been involved with web-based businesses, said he's pleased the Government is making the changes.

"What it will change is because of transparency there will be less bad behaviour," he said.

Revenue Michael Woodhouse said there was a reputation risk to New Zealand’s disclosure regime.

"[The disclosure rules were] thought not [to be] as robust as it could be that's the recommendation of the Shewan report and we are happy to accept those recommendations."

The Labour Party said for the most part the changes were "good" but wanted full disclosure and for the new trust register to be publicly available.

Labour finance spokesman Grant Robertson added New Zealand's reputation has already been damaged, after the Government failed to act three years ago.

"That was a real missed opportunity to protect the integrity of our tax system and it's taken the Panama Papers to actually draw it out."

Mr Woodhouse said: "Obviously the Panama Papers have shone a light on that and we've chosen to act."

The new foreign trust laws will be introduced to Parliament as early as next month.

What will the changes entail?

- There will be a register of all foreign trusts in New Zealand

- Inland Revenue will act as administer of the register, but only police and Internal affairs can search it

- Trusts will need to disclose who is setting up the trust and who benefits

- The trusts beneficiaries will have to file annual returns to the IRD