The government is pulling out all the stops to end perceptions that New Zealand is a tax haven.
With tougher disclosure rules set to come into force from July following the Panama Papers scandal, Inland Revenue (IRD) is promising to pass on the details about those with New Zealand foreign trusts to other countries without being asked.
"We are now effectively a world leader in the exchange of information in relation to trusts," Inland Revenue general manager of international revenue strategy, John Nash said.
The government hopes to end perceptions that New Zealand is a tax haven. Photo: 123RF
Last year's revelations in the Panama Papers showing foreigners used New Zealand to hide their wealth embarrassed the government and forced it to take action after earlier saying there was no problem.
A review by John Shewan recommended stronger rules around foreign trusts, which was passed by Parliament earlier this month.
Foreign trusts will have to be registered with IRD from the beginning of July, and file annual returns.
The information will include who owns the trust, what assets are in it and who the beneficiaries are.
"So there will be a considerable degree of sunlight," Mr Nash said.
While the Panama Papers scandal re-ignited accusations that New Zealand was a tax haven, Mr Nash said the fallout had been minimal.
"For all the highlighting of New Zealand foreign trusts - and we've been dealing with 30 plus jurisdictions in relation to the Panama Papers project - we've only had four requests for information on New Zealand foreign trusts," Mr Nash said
"One would expect if New Zealand's reputation was badly sullied and that there was tremendous interest in foreign trusts we would have received a lot more in the way of information requests."
Mr Nash conceded many countries were still working their way through the Panama Papers, and Inland Revenue could yet face more requests.
"We could well do. It's still a matter of working through, of course, investigations into the Panama Paper transactions."
"At the moment, however, the focus has been very much on Hong Kong and the British Virgin Islands where most of the activity has been centred."
But the government is not taking any chances that New Zealand's reputation could be further damaged.
Inland Revenue already informs Australia if its citizens set up a foreign trust here.
Mr Nash said IRD will expand that approach and actively ensure other countries know what their citizens are up.
"Other jurisdictions will know as to their residents having settled New Zealand foreign trusts and if they need more information they can come to us for additional information in due course."
The number of trusts disclosed has continued to expand to about 11,600, though the rate of growth has slowed since the Panama Papers were released.
Is this the end of NZ's foreign trust industry?
New rules could wipe out New Zealand's foreign trust industry.
Auckland University law professor, Michael Littlewood pointed to the automatic exchange of foreign trust information that Australia demanded from New Zealand in 2006.
"The number of trusts set up in New Zealand by Australian residents fell to zero, or nearly zero."
"So if that's an indicator, it seems likely that few, if any, foreigners in future will set up trusts in New Zealand of this kind."
"And it seems likely also that the 11,000 or so existing trusts might be wound up, or shifted to some more amenable jurisdiction," Professor Littlewood said.
That could see the exodus of billions of dollars in assets as people seek to avoid increased scrutiny.
Industry upbeat about prospects
A New Zealand foreign trust provider who was named freqently in the Panama Papers, Roger Thompson of the accountancy firm Bentley's New Zealand, said his clients had nothing to hide and were "happy for details to be disclosed to government agencies".
Geoff Cone of Cone Marshall was another named. He said the revelations and the government's changes have not had a major effect on his business.
"I have advocated this type of reform for many years and so it is not of concern to our clients."
Richard Taylor, a partner at TGT Legal that also provides foreign trust services, said his clients had adopted a wait-and-see approach.
"Most of them have taken the attitude that while this new regime is perhaps unwelcome from a privacy point of view, they can live with it."
Mr Taylor added the net was tightening globally around tax evaders and money launderers.
"It's part of a global trend of greater disclosure, or greater transparency. I think it was inevitable there would be a requirement for registration of trusts and filing of more information," Mr Taylor said.