Pressure is mounting on Prime Minister John Key to take action after local media analysed more than 61,000 documents relating to New Zealand that are part of the massive leak of data from Mossack Fonseca, a Panama-based law firm. The papers have shone spotlight on how the world’s rich take advantage of offshore tax regimes.
Mossack Fonseca actively promoted New Zealand as a good place to do business due to its tax-free status, high levels of confidentiality and legal security, according to a joint report by Radio New Zealand, TVNZ and investigative journalist Nicky Hager.
Key said it was “utterly incorrect” that New Zealand was a tax haven, adding he was open to changing rules around foreign trusts if advised by a review or the OECD.
“If there’s any need for change in this area, the government will consider it and if necessary, take action,” Key told reporters.
The government was asking the Ministry of Justice to move quickly on rules already under consideration to tighten anti-money laundering requirements for lawyers, real estates and accountants, he added.
Opposition Labour Party Leader Andrew Little said the government must act to “preserve New Zealand’s reputation by shutting down the system that sees our country implicated in a massive global network of tax avoidance.”
The New Zealand government said last month it would begin a review of its foreign trust laws after the Panama Papers highlighted vulnerabilities in its legal framework that made it a possible link in international tax avoidance structures because its foreign trusts are not subject to tax.
Green Party Co-leader James Shaw said that review doesn’t go far enough. He called on Key to “stop defending the tax avoidance industry” and demanded a full inquiry.
Governments across the world have begun investigating possible financial wrongdoing by the rich and powerful after the leak of more than 11.5 million documents from Mossack Fonseca.
The papers have revealed financial arrangements of prominent figures, including friends of Russian President Vladimir Putin, relatives of the prime ministers of Britain and Pakistan and of China’s President Xi Jinping, and the president of Ukraine.
According to the report, Mossack Fonseca’s main contact in New Zealand was allegedly Robert Thompson, co-founder and director of accountant firm Bentleys New Zealand, the registered office of Mossack Fonseca New Zealand.
Thompson was listed in more than 4,500 Panama paper documents, the report said.
The number of foreign trusts in New Zealand has surged to almost 10,700 this year from less than 2,000 ten years ago, according to Inland Revenue figures quoted in the report.
Thompson said in his experience, the use of trusts for tax evasion was not common and his firm did not assist people to illegally hide assets.
“I think the assumption that all New Zealand foreign trusts are being used for illegitimate purposes is unfounded and based largely on ignorance,” Thompson was quoted as saying by Radio New Zealand.