Revenue Minister Stuart Nash recently announced that New Zealand will add 30 territories to its existing list of 60 countries which have mutually agreed to share tax information in a bid to combat tax evasion, according to New Zealand’s Inland Revenue Department.
The move came as part of a global effort to curb tax avoidance under the programme called the Automatic Exchange of Information (AEOI), which is supervised by the Organisation for Economic Cooperation and Development (OECD).
TAX DATABASE
The AEOI system enables tax authorities to exchange information and recheck whether everyone pays the right amount through monitoring and peer review activities. The crosscheck allows all parties to share details of accounts and investments from different types of financial institutions — which include banks, brokers or trusts, private equity funds, and investment advisors.
The OECD, which currently has 154 members worldwide, describes its initiative in the following way: “The Global Forum on Transparency and Exchange of Information for Tax Purposes is the multilateral framework within which work on transparency and exchange of information for tax purposes has been carried out by both OECD and non-OECD economies since 2000. Since its restructuring in 2009, the Global Forum has become the key international body working on the implementation of the international standards on tax transparency.”
GLOBAL NETWORK
At present, New Zealand shares tax information with various territories around the globe, including Australia, Japan, China, South Africa, Canada, Russia, France, Italy, and the United Kingdom. Among the 30 countries to join the existing 60-country list are Romania, Switzerland, Lebanon, Turkey, Pakistan, Nigeria, Panama and Costa Rica.
“The addition of 30 new territories reflects increased international cooperation by OECD and G20 countries to crack down on tax evasion,” Nash said. “New Zealand supports the growing international consensus about the need to eliminate opportunities for tax evasion. The G20 and the OECD account for 88 percent of the world’s economic activity. We are determined that the tax system is fair.”
He further explained that New Zealand will send financial and accounting information to those territories on a yearly basis, and they in turn will share their information as well.
PROMOTING TRANSPARENCY
The public sector believes that this scheme efficiently helps to reduce tax evasion or tax avoidance — which can occur via the underreporting of revenues, overstatement of deductions, or failure to file tax returns.
“It further increases our ability to ensure that all New Zealanders pay their fair share of tax, including those who have financial interests in other countries. It shines a spotlight on those who try to evade tax obligations by hiding their assets offshore,” Nash stated.
Nash is certain that the AEOI system will help the Inland Revenue Department monitor the tax system even more closely. “Inland Revenue will review the information and verify that correct tax is being paid on offshore investments. New Zealand taxpayers are strongly advised to check they have correctly accounted for their offshore investments. If not, they should make a voluntary disclosure to Inland Revenue without delay,” Nash explained.
The Green Party’s co-leader James Shaw also supports the policy. “Tax evaders have been able to avoid paying their fair share of tax that goes towards hospitals and schools, while the rest of us chip in. The government’s move would ensure this happens less and less,” Shaw told the NZ Herald.