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.
END
Q + A
Episode 95
JOHN CHRISTENSEN
Interviewed by CORIN DANN
JOHNWe 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.
CORINIf 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?
JOHNNo, 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.
CORINBut 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.
JOHNYes, 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.
CORINIs 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?
JOHNYes, 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.
CORINWell, the government here—
JOHNSo 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?
JOHNNo. 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.
CORINGiven 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?
JOHNWell, 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.
CORINSo 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.
JOHNYep, 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.
ENDS