Wednesday, August 22, 2012

The perils of deregulation II

Last month, we learned that the global super-rich have hidden 21 trillion US dollars from the eyes of the taxman in tax-havens around the world. Which in turn means the theft of between US$400 billion and US$1 trillion a year in taxes. Some of the culprits in this money-laundering regime are well-known: Switzerland, Monaco, the Bahamas and the Channel Islands. But thanks to our deregulation in the 80's and 90's, New Zealand is also part of this problem:

Similar observations have led Chalkie to another kind of Kiwi entity capable of being exploited by the unscrupulous. It's called a New Zealand foreign trust.

There are several key features of a foreign trust, one of them being that it pays no tax on overseas income. On its own that's a useful attribute, but when combined with another it becomes turbocharged, because foreign trusts don't have to tell anyone what they own, how much money they make, or who benefits from anything they pay out.


However, it may already be apparent that if, say, you had a lot of money and if, say, you wanted to hide it from certain tax authorities, a New Zealand foreign trust could be just the ticket.

So, we have a financial regime that deliberately allows wealthy foreigners to evade taxes in their home countries. This is, to put it bluntly, anti-social, an attack on the global community. So much for being a "good global citizen". We should be busting these trusts, requiring disclosure, and in turn passing the information on to the relevant tax authorities. We already do it for Australia, and we should be doing it for the rest of the world too.