New Zealand Avoids European Union Blacklist
The European Union has flatly denied that New Zealand will be placed on a new blacklist of tax havens stemming from its probe into the Panama Papers. But no smoke without fire as the saying goes, and the idea must have come from somewhere. Well, as it turns out, that somewhere was a non-legislative resolution proposed by a member of the European Parliament that New Zealand was worthy of investigation because it made an appearance in the documents leaked from Panama law firm Mossack Fonseca. And it seems that New Zealand’s foreign trusts regime has put the country on the radar of the international transparency campaign.
Certainly, if anonymity is top of your list when organizing your financial affairs, you could do a lot worse than make use of a New Zealand foreign trust, which has been one of the most popular vehicles for this purpose for a number of years. But if having trust laws, which by their very definition are designed to break the link between an asset and its owner, was the only criterion for inclusion on a tax haven black list, that list would be very long, and include some surprising names. It’s coming to something when a country with a corporate tax rate of 28 percent, which, incidentally, is comfortably higher than the EU average, is accused of being a tax haven. As New Zealand Prime Minister suggested when this storm (in a teacup?) broke, those accusing other nations of failing transparency standards should look closer to home before doing so, especially as New Zealand is legislating to introduce a registry of foreign trusts.
New Zealand might not be a low-tax economy, but it is a dynamic and largely pro-business one. The Heritage Foundation/Wall Street Journal places it third on its latest league table of economic freedom, behind only Singapore and Hong Kong, and just ahead of Switzerland. New Zealand fares even better in the World Bank’s Doing Business Index, where it is positioned in second place behind Singapore – if you’re looking for a place to form a company quickly and cheaply, New Zealand is the place to do it, ranked as it is at number one in the “starting a business” sub-index. I wonder whether this, combined with the Government’s recent assertion that few of the OECD’s BEPS recommendations require a response from New Zealand because its tax regime is robust enough, has ruffled a few feathers in Europe, which has become the standard bearer for BEPS, and increasingly sclerotic in its approach to economy and tax policy.
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