WELLINGTON, June 27 (Xinhua) -- New Zealand's lax foreign trust disclosure rules are inadequate and "not fit for purpose," according to a report from a government-commissioned inquiry out Monday.
The report by an independent tax expert said there was "a reasonable likelihood" that the country's foreign trust regime "is facilitating the hiding of funds or evasion of tax in some instances."
"The rules are not fit for purpose in the context of preserving New Zealand's reputation as a country that cooperates with other jurisdictions to counter money laundering and aggressive tax practices," said the inquiry report.
The government launched the inquiry into foreign trusts in April amid claims that wealthy foreigners were using foreign trusts to evade taxes in their home countries or to obscure ill-gotten gains.
Critics claimed that New Zealand foreign trusts enable tax avoidance because they have no requirement to disclose either the trust beneficiaries or the source of assets.
The report recommended a significant increase in the information disclosed when a foreign trust sets up, including naming foreign trustees, along with annual reports with details of settlors, beneficiaries, and full financial statements, and increased enforcement to deter foreigners looking to use New Zealand foreign trusts "for illicit purposes."
"In theory, New Zealand's existing tax disclosure and exchange of information arrangements should be sufficient to deter tax abuse, and its anti-money laundering rules should ensure that funds held by foreign trusts are from legitimate sources," said the report.
"However, under current law and enforcement practices the risk of detection by authorities is low. The inquiry considers that the disclosure requirements can be justifiably described as light-handed."
Finance Minister Bill English said the recommendations looked "sensible and well-reasoned."
The government would issue a formal response after officials had examined the inquiry in detail in coming weeks, English said in a statement.
Critics had claimed the foreign trust regime effectively established New Zealand as a tax haven and damaged its reputation as a responsible player in the fight against tax avoidance.
