Inland Revenue can access detailed information on foreign trusts set up in New Zealand and is able to pass it on to tax authorities in other countries, Parliament has been told.
“It’s ridiculous to suggest New Zealand is a tax haven,” Prime Minister John Key said.
“We have a strong tax treaty and information exchange network that helps discover and prevent tax avoidance through exchanging information.”
Opposition parties are demanding tougher tax laws as the fallout from a massive leak of millions of documents from a Panama-based law firm continues, and MPs used question time on Tuesday to challenge Mr Key over New Zealand’s involvement.
The 11.5 million leaked documents from law firm Mossack Fonseca have revealed 214,000 trusts and companies set up in more than 200 countries.
New Zealand is one of them, and the papers show Malta’s energy minister Konrad Mizzi and the prime minister’s chief of staff, Keith Schembri, set up two offshore trusts in 2015.
There are about 12,000 foreign trusts in New Zealand.
In parliament, Mr Key rejected claims by Labour and Green Party MPs that current law protects foreign trusts from scrutiny.
“The trustee must keep detailed financial and other records … Inland Revenue can get this information and will give it to the tax authorities in any other country, if requested under a relevant tax agreement,” Mr Key said.
“New Zealand has always been able to comply with these sorts of information requests from treaty partners.”
Mr Key says New Zealand doesn’t tax foreigners on money earned overseas and put into trusts in NZ.
“It’s up to tax authorities around the world to enforce their own tax laws on this income and on their own residents,” he said.
“We can help them do that by providing detailed information, on request, about trusts administered from New Zealand.”
Labour leader Andrew Little wants an inquiry to assess the scale of the foreign trust issue in New Zealand.
“We need to know how big the problem is and then what sensible responses need to be made in order to preserve our reputation around the rest of the world,” he told reporters.
Mr Key and Revenue Minister Michael Woodhouse don’t think that’s necessary, but say they’ll consider tightening the rules if the OECD comes up with recommendations.
They say the OECD reviewed New Zealand’s tax law in 2013 and gave it a clean bill of health.