Govt may change tax rules for 'look through companies', says Key

Monday 9th May 2016

Officials were already looking at reforms to the so-called 'look-through company' regime, implicated in New Zealand's connections to the Panama Papers before the massive dump of leaked tax records became public, Prime Minister John Key says.

A Cabinet committee would be looking this week at "base-minimisation rules relating to LTCs," Key told his weekly post-Cabinet press conference. "There have been concerns about that."

Key addressed the latest developments in the document dump as the first order of business in his press conference, saying it was "utterly untrue" that New Zealand operated as a tax haven, citing OECD acknowledgement that the country has very high levels of transparency and compliance with international tax rules, has information-sharing tax agreements with 109 countries, and participated in an emergency meeting of OECD tax experts in Paris when the Panama Papers were first released.

"I understand that some people want to invent the tag that New Zealand is a tax haven. It's just not true," Key said.

In a 'manifesto' published over the weekend, the papers' leaker, calling himself John Doe, accused Key of being "curiously silent" on the tax haven activities of the Cook Islands.

"I've also been curiously silent on Russia, Angola and Argentina," said Key, who expressed surprise at the suggestion New Zealand controls domestic Cook Islands law. The far-flung Pacific nation is governed "in free association" with New Zealand, which means the country is independent but coat-tails on this country's foreign and defence policies and uses the New Zealand dollar as its currency.

A discussion paper on the LTCs was issued last September, to build on tax law changes announced in 2010 that ended the use of loss-adjusted qualifying companies (LAQCs), which had become a common avoidance vehicle, especially for property investors. Those changes, which came into effect in 2011, were estimated at the time to be worth $190 million a year in previously unpaid tax. The LTC regime attributes company earnings to shareholders in proportion to their interests and imposes a tax at the personal rather than the company income level.

Panamanian law firm Mossack Fonseca, whose files have been leaked, is shown offering its international clients services in New Zealand including the establishment of look-through companies as well as trusts.

BusinessDesk.co.nz

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