So, is NZ a tax haven?

The left-wing, the opposition and the Media party are all claiming that NZ has become a tax haven as a result of the revelations in the so-called Panama Papers.

So is NZ a tax haven?

Well, the short answer is no.

The slightly longer answer is not even close.

Fortunately the OECD has written a Policy Paper on tax havens, a document the Media party clearly haven’t read, much less understood.

2.1 Definitions of Tax Havens

Given the importance of the issue and the international commitments in this area, it might be expected that identifying tax havens would be straightforward, but this is not the case. There is no agreed definition of what the term “tax haven” actually means. Probably the best known definition of a tax haven is that used by the OECD (1998).

Four key indicators of tax havens are identified:

  1. No or only nominal taxes (and offering, or being perceived as offering, a place for non-residents to escape tax in their country of residence);
  2. Lack of transparency (such as the absence of beneficial ownership information and bank secrecy);
  3. Unwillingness to exchange information with the tax administrations of OECD member countries; and
  4. Absence of a requirement that activity be substantial (transactions may be “booked” in the country with no or little real economic activity).

Let’s look at those individually.

“No or only nominal taxes (and offering, or being perceived as offering, a place for non-residents to escape tax in their country of residence)

We have a comprehensive tax system with double tax treaties with most of the OECD. Trusts are actually taxed at a higher rate than companies so there is no tax advantage to hide income in trusts. Because of the double tax treaties there is also no provision to hide income in trusts for the avoidance of tax in their home country. New Zealand taxes on income earned in New Zealand or by New Zealanders on their world-wide income. So this is a fail for the case of whether or not NZ is a tax haven. Strike one.

Lack of transparency (such as the absence of beneficial ownership information and bank secrecy)

Other than privacy laws, which media just ignore when claiming “public interest” we do not have bank secrecy, and any organisation has look through by authorities. Strike two.

Unwillingness to exchange information with the tax administrations of OECD member countries

New Zealand has double tax treaties with forty countries. Clearly there is a willingness to exchange information with plenty of jurisdictions. We are also currently negotiating Double Tax Agreements with nine other countries (Austria, Belgium, China, India, Luxembourg, Netherlands, Norway, Portugal, United Kingdom). In other words we are extending our willingness to exchange information.

New Zealand also has Tax Information Exchange Agreements (TIEAs) in force with:

And TIEAs that are signed, but not yet in force, with:

And we are currently negotiating TIEAs with:

  • Antigua and Barbuda
  • Aruba
  • Grenada
  • Macao
  • Monaco
  • Montserrat
  • Nauru
  • St Lucia
  • San Marino
  • Seychelles

Clearly and demonstrably we share information with other tax jurisdictions. Strike three.

Absence of a requirement that activity be substantial

Any income earned in New Zealand or by activities by New Zealand individuals and companies taxable on world-wide income. Any income. There is no substantial activity exclusion, Strike four.

Clearly and demonstrably on all four key indicators of whether or not a country is a tax haven as stipulated by the OECD New Zealand fails to meet the threshold. There is not a case that New Zealand is a tax haven, no matter what lying little weasels like Nicky Hager may say about it.

Conveniently Wikipedia also provides a list of countries that ARE defined as tax havens, not that they have bothered to check that. They prefer instead to take dictation from Nicky Hager.

Further the OECD has prepared a blacklist of countries that they classify as a tax haven. In their document they clearly lable New Zealand as NOT a tax haven, with us meeting and implementing the internationally agreed tax standard.

 

The BBC reported on this list in 2009:

The Organisation for Economic Cooperation and Development (OECD) has published its blacklist of non-cooperative tax havens.

Costa Rica, Malaysia, and the Philippines are the countries listed as not having agreed to tax standards.

Uruguay had originally been listed too, but later protested that it had been wrongly included.

After listening to its arguments the OECD said it was happy the country had agreed to its tax transparency rules.

The list is part of efforts agreed at the G20 summit to clamp down on havens.

There is also a list of 38 places that have agreed to improve standards but not yet done so, such as Gibraltar, Liechtenstein, Andorra and San Marino.

On Thursday, G20 leaders agreed to take sanctions against tax havens using the OECD list as its basis.

In their communique, they agreed, “to take action against non-cooperative jurisdictions, including tax havens”.

“We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over.”

We complied with the OECD requirements in 2009, and the Media party has made much of the fact that National didn’t implement changes in 2010, therefore we still comply with the OECD requirements.

Any claim that New Zealand is a tax haven is simply a construction from the political left to suit their own political beliefs and their hit job against the government. Unfortunately the supposed “investigative” journalists all working on this haven’t even bothered to understand what is actually a tax haven and what is not.

The claims simply do not stack up. New Zealand is not a tax haven by any legal or jurisdictional definition, It is only a tax haven in the political bumper sticker slogans of idiot journalists and left-wing politicians playing their own version of dirty politics and dirty media.

 

-BBC, OECD, Wikipedia

 


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  • Korau

    Any country that doesn’t steal 100% of the profits made by the greedy (insert the target de jour here) is a tax haven in the eyes of the socialists whose mantra is “Your money is our money, so get over it”!

  • JustAnotherLurker

    So, it didn’t need seven top “journalists” locked a room all day with a two-bit author to establish this fact? Did they waste their time and their employer’s (i.e. us) money? Can we ask for a refund of their salaries please?

  • Woody

    With information like this freely available, how on earth have the 7 mental dwarfs who are gleefully putting their names to the big exposé managed to deduce that yes, New Zealand is definitely a despicable tax haven?

  • Jonathon Stone

    The problem with using Wikipedia as a source is that it is easily edited, as it was 10 hours ago. The benefit is that Wikipedia tracks edits.
    Seems New Zealand was added to the list by an anonymous user. Not completely anonymous though when your ip address can be traced…

    • sonovaMin

      I had similar concerns myself. The information you have posted looks very much like Green Party mischief.

      • Jonathon Stone

        I wonder how many people are employed at the Department of Sustainability & Environment in the Victorian Premier’s office? Must be a reasonably small list to cross reference to find a link to someone with an axe to grind

        • PhantomsDoc

          Especially at that time of night.
          It shouldn’t be to hard for them to do a card search of people who were onsite at around that time.

    • Intrigued

      Looks like it was last edited again an hour ago with NZ removed by an anonymous user!
      Not sure how to check geo location of that.

  • Seriously?

    I think the left have made a simple spelling error, they want NZ to be a tax “heaven”.

    A tax on carbon.

    A tax on fast food.

    A tax on financial transactions.

    A tax on the use of water.

    A tax on sugar.

    A tax on foreign investment.

    A tax to encourage electric cars.

    A tax to pay for a universal income.

    A tax for… well a tax for just about anything you might want.

    • kayaker

      Don’t forget tax the rich

    • zanyzane

      Also Capital Gains Tax on all property, all business, all share portfolios, holiday homes, inheritance

  • kayaker

    I read up a bit on why people set up foreign trusts. One of the reasons is that in some countries governments are so corrupt that any assets, investments and returns on same can be taken off you. Inheritances do not necessarily go to the people they’re intended for. Therefore, in these cases, people are protecting their assets and quite rightly so.

    • zanyzane

      Also non resident kiwis with Family Trusts also would be considered a Foreign trust.

  • Cadwallader

    If New Zealand is a tax haven, then from where do politicians get paid? Do these idiots on the left think their salaries are from a money-mill beneath the House? Sadly, they probably do.

  • Whitey

    I’ve always said that the best thing we could do for our economy is to make NZ a tax haven.

    • Kevin

      Given the OECD definition I would think being a tax haven would be a good thing. Give the government in tax only what it needs to operate and no more.

      • Whitey

        I couldn’t agree more.

  • Alan Beresford B’Stard

    I note all the participants in this shabby little smear, are now falling over themselves to admit that nothing illegal is going on. ‘Nuff said.

    • niggly

      Perhaps their news organisations’ lawyers have indicated their journos are skating on thin-ice with their nonfactual smears?

      I think it would be appropriate and in the “public interest” for the public to see what these news organisations’ lawyers are saying about this beat-up.

  • Keeping Stock

    Excellent post. Unfortunately, the normal suspects are going to continue repeating the lie that New Zealand is a tax haven, and ultimately they will get a degree of traction. Equally unfortunate is the fact that explaining why New Zealand is NOT a tax haven is complex, and beyond the understanding of many.

    TVNZ and RNZ have invested a lot of time and effort into this sting, and sadly they have the resources to inflict a lot of perceptional damage, irrespective of the fact that it’s all based around a lie.

    • Rob

      Not a good look in my opinion to be seen to be in bed(as state funded ) with Hagar

      • Keeping Stock

        I agree wholeheartedly Rob. Could anyone blame the Government if this was the last straw which caused them to investigate the sale of RNZ and TVNZ.

        When the state-funded or state-owned broadcasters begin actively trying to bring down a democratically elected government, you can’t expect the government not to respond.

  • Gladwin

    Shock Horror! Just read the Bloomberg article on the subject in the Sydney Morning Herald and New Zealand was not mentioned once!

  • Bob Dazzler

    Just more ill informed ranting by the left. It is a poor strategy as their intended probably don’t read daily news papers or read on line.

  • Crowgirl

    One of the “reporters” on the CBC this morning actually said David Cameron’s family trust was involved in “tax evasion”. I hope someone told him and that he sues. It was at that point I switched channels in disgust and I haven’t been back since. Not much interest being shown to this story on all the main outlets – they all appear to be already sliding off the front page.

  • Catriona

    Meanwhile, the poverty stricken have been totally ignored by Labour and the Greens throughout this political frenzy. Another kid got bashed to within an inch of its life most likely and we’re not hearing a squeak about the poor and needy and why the current Govt is a pack of b’stds for not planting a money tree in their garden.

    • niggly

      That is an excellent point. To the poor, unemployed, sick etc, this is yet another side-show distraction from the real issues that affect them day in and day out.

      Shame on Labour, shame on the Greens and shame on those in the MSM creating a circus freakshow whilst ignoring those in real need.

      • zanyzane

        I wish Labour would focus more on making the Land Wars a holiday like Anzac day rather than idiotic issues that does not concern us poor employees.

  • Wheninrome

    The old story, repeat the story enough times in the hope that it is eventually believed to be fact.
    A bit like telling someone they didn’t commit a crime, tell it enough times, write books about it and the gullible (including the guilty person) will start to believe it is fact.

  • IKIDUNOT

    The best punishment for this bunch of leftie journos et al is a convincing win for a National led government in the next elections. “Whatever we do or say……”

  • Christie

    Thanks – a well written and researched article which points out the truth. I try to tell people this stuff all the time, but it falls on deaf ears. Our tax system is robust, and our tax rates are reasonably high. I have no problem with the Opposition and journalists trying to hold the Government of the day to account, but this type of gotcha politics really has to stop. I agree that TVNZ and RNZ should be sold off, as they have simply become the mouthpieces of crazy far left wingers, such as Nicky Hagar.

  • Charlie

    Andrew James Little’s name seems to pop up quite a few times in the companies office register of Directors, shareholders etc. It therefore follows by his own reasoning that he is part of the evil network of nasty directors an business operatives.
    Maybe he is even involved in a trust?
    I think that you should follow up this sinister discovery of potentially illegal activity right on our doorstep! I bet you could make a better job of it than the Media Party and Pricky Hager are doing.

  • The Fat Man

    Certainly New Zealanders are taxed at a very high rate, GST, PAYE, ACC, FBT, EXCISE, the list goes on.

    The question is has New Zealand become a haven for offshore trusts?

    Now there are perfectly legitimate reasons for having a trust so that is not necessarily bad. But there are many dubious reasons why people would want to go to the trouble of setting up an offshore trust.

    So has New Zealand done enough or doing enough to identify and shut down offshore trusts based in New Zealand used for illegal purposes. Like drugs and money laundering etc.

    Where there is smoke there is fire and there is a lot of smoke.

    • zanyzane

      Under the Approved Issuer Levy regime, banks here and companies can borrow from a overseas lender and be exempted from the NZ withholding tax regime entirely on the interest paid. The AIL levy rate has been reduced from 2% to now zero. Banks offer this zero rate of tax to overseas cash depositors by treating the cash received as a loan from a overseas lender.

  • fecnde

    Providing we are complying with international treaties (that IS important) my only concern is: are we making a decent profit for services provided?

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