John Shewan to review foreign trust disclosure

UPDATED: “We're prepared to look at changing the disclosure rules if Mr Shewan's review finds this is warranted,” says Revenue Minister Michael Woodhouse.

See also: Some expert advice for the Shewan review

UPDATED: Former PricewaterhouseCoopers chairman John Shewan has been drafted in by the government to run the rule over the country's foreign trust disclosure rules after tax-dodging practices unearthed in the so-called Panama Papers showed that activity extended to New Zealand. 

Finance Minister Bill English and Revenue Minister Michael Woodhouse appointed Shewan to hold an independent inquiry to check whether New Zealand's disclosure rules are fit for purpose or need improving. The terms of reference include reviewing foreign trusts' disclosure rules on record-keeping, enforcement and the exchange of information with other tax jurisdictions, and Mr Shewan is to report back by June 30. 

"Ministers decided that in light of the 'Panama Papers' being released last week, it's worth looking at whether the disclosure rules are fit for purpose and whether there are practical improvements we can make," Mr English said in a statement. "We've asked Mr Shewan to take a thorough and independent look at the current regime to check that it's fit for purpose." 

Mr Shewan, who chairs the manager of the Fonterra Shareholders' Fund, has been involved in a number of high-profile tax cases. Evidence in the structured finance suit against Westpac Banking Corp showed he advised the lender to declare tax at a rate comparable with competitors, at around 15%, although actual cash payments could be as low as 6%, against the then-legislated corporate tax rate of 30%. 

The IRD's case against four Australian-owned banks operating in New Zealand was settled for $2.2 billion on Christmas Eve, 2009. 

Mr Shewan also came in for criticism when he provided expert advice in the Penny & Hooper case, where Christchurch surgeons Ian Penny and Gary Hooper were found to have paid themselves artificially low salaries to reduce their tax bills when the top income tax bracket was hiked to 39% in April 2000. The Court of Appeal and Supreme Court put his evidence to one side, as it expressed views on legal issues that shouldn't have been given by an expert witness. 

Mr Woodhouse again rejected claims New Zealand is a tax haven, saying former Finance Minister Sir Michael Cullen established a policy to allow for cooperation across tax jurisdictions in 2006, which has since been further improved. He said Inland Revenue will send a representative to a specially-convened meeting in Paris called by the Organisation for Economic Cooperation and Development and will look at any issues raised there. 

New Zealand's provisions on tax secrecy are under scrutiny in a separate review of tax legislation, with the government looking to scale back New Zealand's privacy protections to allow more sharing of taxpayers' information. The government wants to let the IRD share more information on an anonymised format to provide better services, and also improve how law enforcement can use IRD information more effectively. That also extends to cross-border sharing as US legislation aimed at preventing tax evasion imposes stricter standards on other jurisdictions. 

Separately, a review of legislation governing intelligence agencies by Sir Michael and governor-general-in-waiting Dame Patsy Reddy recommended extending tax information sharing to the New Zealand Security Intelligence Service and Government Communications Security Bureau. 

Tax secrecy has traditionally been considered necessary to encourage compliance by taxpayers. 

(BusinessDesk)

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