Govt releases foreign trusts inquiry   27 Jun 2016

Hon Bill English

Minister of Finance

Hon Michael Woodhouse

Minister of Revenue

27 June 2016

Govt releases foreign trusts inquiry and steps to strengthen international tax rules

The Government today released tax expert John Shewan’s independent Inquiry into Foreign Trust Disclosure Rules, and the steps it is taking to strengthen tax rules as part of its work with the OECD to clamp down on base erosion and profit shifting (BEPS).

Mr Shewan’s inquiry noted that foreign trusts are legitimate vehicles and that New Zealand’s tax treatment of foreign trusts is appropriate. However, it also recommends disclosure arrangements should be strengthened, including by:

• Strengthening the initial registration requirements for foreign trusts, and allowing regulatory agencies to search the register.

• Requiring foreign trusts to file an annual return, including their financial statements and details of distributions.

It also recommended a number of changes to anti-money laundering rules.

“I want to thank Mr Shewan for conducting such a thorough investigation into foreign trusts. His recommendations look sensible and well-reasoned and, as we’ve always said, we are open to making improvements to New Zealand’s already strong tax settings,” Finance Minister Bill English says.

“The Government will look to implement the recommendations after officials have examined the inquiry in detail and reported back to Ministers. A formal response to the Inquiry will therefore be issued in the coming weeks.”

Revenue Minister Michael Woodhouse says that improvements to foreign trust disclosure rules are part of a significant work programme to strengthen New Zealand’s tax laws and keep them in line with international best practice.

“New Zealand has been working intensively with the OECD to develop a global response to BEPS tax strategies, which allow multi-nationals to pay little or no tax by exploiting discrepancies in different countries’ tax rules and shift profits to places where tax rates are lower.”

In October the OECD set out an international action plan to help address this.

“The Government is today releasing the changes New Zealand will make to address profit shifting, based on the OECD action plan, as well as the significant steps we have already taken as part of this global effort,” Mr English says.

Mr Woodhouse says a lot of work has already gone into strengthening New Zealand’s tax rules – meaning that many of the OECD’s recommendations are already implemented.

“Our tax settings are already sound, but there is always room to improve,” he says.

“We have already strengthened our controlled foreign company rules, thin capitalisation rules, bank minimum equity rules, and, more recently, I introduced legislation to improve our non-resident withholding tax rules.

“The next steps include stronger rules preventing excessive payments from a New Zealand company to its foreign parent, greater disclosure requirements for multi-nationals, and further sharing of tax data with foreign authorities.”

Mr English says stopping illegitimate profit shifting is a global issue.

“The BEPS problem stems from mismatched legislation between countries – which is why we are working with the OECD towards a coordinated, global solution,” he says.

The Shewan Inquiry into Foreign Trust Disclosure Rules can be found atwww.treasury.govt.nz/publications/reviews-consultation/foreign-trust-disclosure-rules

The Government’s BEPS action plan can be found at www.taxpolicy.ird.govt.nz

ends

Add a comment