Tuesday, August 02, 2016

The cost of being a tax haven

New Zealand is a tax haven. We allow foreigners to set up secret, tax-free trusts in New Zealand, which (due to the way NZ and foreign tax laws work) effectively allow money to escape taxation completely. The system has been proven to be used for corruption, for money laundering, for crime, and for international arms deals. We are a bad international citizen. And now, the EU is going to make us pay for it:

New Zealand is under investigation by the EU as it prepares a blacklist of global tax havens, Newshub revealed on Monday night.

The grouping of 28 European nations has compiled a list of countries with lax tax laws. Following the release of the so-called Panama Papers, it has confirmed that New Zealand is under investigation.

The EU is our third largest trading partner and worth about $7000 for every person in New Zealand.

The EU loses around NZ$1 trillion to tax havens each year, and it intends to put a stop to the practice by threatening a raft of sanctions against countries that don't comply to its standards.

New Zealand doesn't comply, even when the recommendations made by tax expert John Shewan as a result of the Panama Papers are included.

The latter point is important. While National is adopting all the recommendations of the Shewan inquiry, that inquiry was a strapped chicken aimed at protecting the status quo. As a result, those changes don't go nearly far enough. The EU wants us to tax these trusts, to automatically exchange their information with other tax authorities, and to establish a public register allowing citizens to uncover corruption. These all seem like a good idea. And if it drives the foreign trust industry out of business, even better - because we neither need nor want that sort of corrupt industry in New Zealand.