The government is being warned that quick fixes to the foreign trust regime in the wake of the Panama papers will not be enough, if the country is serious about restoring its battered reputation.
John Shewan Photo: SUPPLIED
The former head of PWC, John Shewan, is reviewing the rules following the release of documents that indicate New Zealand is being used by wealthy foreigners to dodge tax.
The terms are narrowly drawn around the disclosure rules, and whether they are fit for purpose.
Business New Zealand chief executive Kirk Hope said the review should provide a sense of the gap between the rules and New Zealand's international obligations to crack down on tax dodging.
"It's about marrying up the rules that relate to, say for example, money laundering, where that information is already known, with the tax system, where that information may not be known.
"So, there is potentially a missing component, but whether we're out of step with other jurisdictions in that respect, that's a good point for John Shewan to be looking at."
A professor of law at Auckland University Michael Littlewood said the easiest answer to damping criticism of the regime was to make the details about the trust's owner, its assets and its beneficiaries publicly available.
"Beefing up the disclosure requirement would probably be adequate to resolving the difficulty and eliminating the negative publicity we've been getting."
Sterling Tax Services director Martin Riley said that was a quick fix solution.
He said the government should follow the rest of the world and tax a trust where it was managed and controlled - in New Zealand.
"My suggestion would be that maybe we just tax those trusts at a very low rate, and that way we would get some tax revenue from these foreign trusts, not completely lose all of them.
"And they would have a choice whether they want to migrate to another country and have their trusts managed elsewhere in the world, or have them continue to be managed here in New Zealand."
Both Professor Littlewood and Mr Riley agreed that greater transparency will nobble New Zealand's growing foreign trust industry.
That is an outcome the Council of Trade Unions would favour.
Its economist Bill Rosenberg said the foreign trust regime offered no benefit to New Zealand, and the government should do away with it.
"The most fundamental question is whether we should have these trusts at all. They seem to be benefiting a very small group of accountants and lawyers, but what is the actual economic benefit to New Zealanders more broadly?
"And why should we be helping bludgers from other countries rip off their own countries?"
Given the industry is estimated to be worth up to $50 million a year to New Zealand, the Prime Minister is highly unlikely to give it up.
But all commentators agree there's one thing Mr Key can't do - and that's nothing.