New Zealand has been heavily implicated in the Panama Papers Leak this week. Over 61 000 references have been made to the country, found through an investigation into the documents leaked by Mossack Fonseca, by state media TVNZ, RNZ and independent journalist Nicky Hager. Mossack Fonseca is a Panamanian law firm and features heavily in the Panama Papers leak, and is widely regarded as a law firm that helps the super rich hide their money, in order to avoid paying tax.
Mossack Fonseca has been linked to New Zealand because it “based” a lot of its business there, secret shelf companies and trusts mostly. It urged people to use New Zealand as a place to base businesses, because of its tax-free status regarding foreign trusts, along with its high confidentiality agreements, legal security, and lack of structure in the legal system. The choice to use New Zealand as a base for setting up offshore companies, comes from Mossack Fonseca’s connection with Roger Thompson, who it always conducted business with. Thompson set up his own firm, Bentley’s Chartered Accountants, which is registered in Auckland, NZ. New Zealand’s simple tax code allowed Bentley’s to declare that they had no need to pay tax under foreign trust law.
The number of Foreign Trusts have since tripled, however New Zealand government still declare that there is no problem with the way their tax system is set up. However, ex-minister for the country has admitted that Foreign Trusts are being abused.
Peter Dunne, the former Revenue Minister, has said on the matter that the Inland Revenue had never raised any concerns about foreign trusts during his time in charge. He has also since questioned the integrity of the Inland Revenue, and whether they decided on if the issue of Foreign Trusts was unimportant, or if they didn’t even know they they were being abused.
The current Revenue Minister Michael Woodhouse defended New Zealand’s tax system today, saying that calls by Labour parties to ban Foreign Trust laws are bogus , despite the remaining fact that the use of them has quadrupled in recent years.
HMRC are still on the hunt for wealthy investors, who might be using Foreign Trusts, and are planning on investigating more and more of the super-rich in years to come.