New Zealand more of a tax haven than Island neighbours
New Zealand still has some work to do to stop the country being used as a safe haven for illicit funds, a new survey shows.
The 2015 Financial Secrecy Index has been released, which ranks countries on their ability to promote fiscal transparency.
The index is produced by the Tax Justice Network, which says an estimated US$21 trillion (NZ$31t) to US$32t of private money is sitting untaxed, or lightly taxed, in countries that offer high levels of secrecy.
It said countries such as Greece, Italy and Portugal had been brought to their knees by decades of tax evasion and state looting, via foreign secrecy.
New Zealand was ranked the 54th most secret country out of 82.
Switzerland was number one, followed by Hong Kong and the United States.
The US was one of the few countries to become more secret since the last survey in 2013, overtaking notorious tax havens such as the Cayman Islands.
The Tax Justice Network said it was most concerned about the United States because it posed serious threats to emerging transparency measures.
“The United States’ hypocritical stance of seeking to protect itself against foreign tax havens while preserving itself as a tax haven for residents of other countries needs to be countered,” it said.
New Zealand’s ranking improved from 48th in the 2013.
The Anti-Money Laundering/Counter Financing of Terrorism Act came in to force in 2013 and has been rolling out since, requiring financial services providers to retain greater, more detailed records on their clients and their sources of money.
Australia was ranked 44th.
Britain’s territories and dependencies were separated out in the rankings and the United Kingdom came in at 15th. But the report said, had they been combined, Britain would have taken the top spot by a big margin.
Pacific Islands nations such as Nauru, Cook Islands and Samoa were some of the least secretive.
The report said New Zealand was performing well in its efficiency of tax and financial regulation and in keeping up with international standards and co-operation.
It partly avoids tax evasion through a tax credit system but partly allows harmful legal vehicles such as cell companies.
The country was doing less well when it came to company accounts – New Zealand does not require them to be available on public record, and does not require public country-by-country financial reporting.
It also does not maintain company ownership details in official records.
Massey University banking commentator Claire Matthews said the results were what she would expect, although New Zealand was doing better than “partly” complying with international anti-money laundering standards, as the report suggests.
Some of the measures the report was holding countries to were not as relevant in New Zealand, Matthews said.
“When it comes to county-by-country reporting, a lot of the companies that do report here are owned elsewhere anyway so they do not need to have country-by-country reporting.”
There has been a recent crackdown on “shell” companies listed on the Financial Service Providers Register, who want to benefit from the impression of being New Zealand-based.
But Matthews said that was unlikely to affect New Zealand’s secrecy rating.
“They are looking at all companies, not just financial services providers.”
New Zealand accounts for just over 0.1 per cent of the global market for international financial services, making it a small player compared to other countries in the report.
