Labour and off-shore trusts

Richard Harman wrote in the Politik newsletter:

While the Prime Minister was sticking to his briefing notes at his weekly press conference yesterday on the question of the 11,000 offshore trusts registered in New Zealand, it appears the Clark Labour Government may have enabled their presence here. 
The 2007 rewrite of the Income Tax sets out how overseas people can set up in trusts in New Zealand and pay no tax provided that none of the income in the trust originates in New Zealand.

In 2005 Labour’s Finance Minister, Michael Cullen, tightened up reporting requirements for the trusts but emphasised that their activities would remain tax free.

He said: “”Foreign trusts will be required to have an IRD number, keep records for New Zealand tax purposes, provide certain information when they are first set up in New Zealand or appoint New Zealand trustees, and provide information to Inland Revenue on a regular basis.

Under New Zealand law, foreign income derived by non-residents is outside the New Zealand tax base, and rightly so. The government has no intention of changing that. “Because they are not taxed here, foreign trusts that are set up here do not have to file New Zealand income tax returns or keep records if they receive only foreign-sourced income.“

As is often the case with the Politik newsletter, you read stuff you don’t see elsewhere in the media.