Panama Papers NZ - Bentleys, in Auckland's Queen Street, is the registered office of Mossack Fonseca NZ. Co-founder Roger Thompson responds to our questions.
You, Bentleys and Mossack Fonseca NZ are extensively named throughout the "Panama Papers". How do you respond to that?
I have provided professional services to Mossack Fonseca NZ. This includes acting as a professional director of an associated trustee company.
Looking at the data it seems that a relatively small number of trusts or companies have been established in New Zealand that are related to Mossack Fonseca.
In fact New Zealand does not feature in the 10 top jurisdictions. See the chart labelled "The 10 most popular tax havens in the Panama Papers".
I think the painting of New Zealand as a tax haven has been grossly exaggerated.
Are you a "director for hire"?
Like many accountants and lawyers I will accept professional director appointments for well regarded clients after undertaking satisfactory due diligence.
Do people use your services to limit their tax liabilities or to deliberately keep their identities secret? Are there other reasons for offshore individuals establishing commercial entities in New Zealand?
New Zealand citizens are possibly the most prolific users of trusts in the world. There are a number of reasons, the most common being the preservation of wealth.
Business people commonly use trusts to separate private assets from business assets that may be at risk to business creditors, other people use trusts to keep family assets protected from claims from spouses or de facto relationships, spendthrift children etc., and additional flexibility and protection in passing assets to future generations as opposed to keeping assets in their own name to devolve by will subject to challenge by family members.
Prior to the abolition of estate duty, trusts were commonly used to hold assets likely to increase in value so as to protect that increase in value from estate duty.
The use of trusts for the purposes mentioned above is common practice and well accepted as legitimate.
Wealthy people in other countries have these same reasons for using trusts. There may also be a prevalence of kidnapping and blackmail in their country of residence, forced heirship laws (lack of freedom to choose who inherits their wealth when they die) and possibility of arbitrary state seizure of assets. The family and their businesses may be spread geographically and be subject to multiple laws in multiple countries. These are all situations where a trust can offer protection and flexibility.
However many countries do not have laws which enable the creation of trusts. Trusts are typically only found in countries that have adopted the English common law type systems such as UK, commonwealth countries and the USA.
For people in countries that do not have trusts they will need to consider trusts established in other countries that do have laws under which trusts can be created.
There are a number of choices including New Zealand.
New Zealand is attractive because we have good trust laws, a good independent non-corrupt judicial system and are stable economically and politically.
Another key factor is that NZ does not impose an additional layer of tax on foreign income of trusts where the settler of the trust is non-resident. There is nothing sinister or improper in this.
In my experience the use of trusts for tax evasion is not common.
Often a trust will own shares in a company carrying on a business which is paying full tax in the country in which the business operates.
The beneficiaries declare and pay tax on any income that is allocated to them by the trust. There is no tax evasion occurring by using a New Zealand trust in such way, rather a New Zealand trust gives the client the legal benefits of a trust without imposing additional taxes on them.
This is a perfectly legitimate and proper use of New Zealand trusts.
We do not assist people to illegally hide assets.
Trust deeds are generally confidential documents which are not publicly available. However whenever requested, we will provide copies of trust deeds to the Inland Revenue Department.
The use of trusts and people's rights to keep their business and personal affairs private and confidential is legitimate and normal.
Unfortunately this appears to have been overlooked by the journalists releasing personal and confidential information without any regard to personal rights.
Do you actively promote New Zealand trusts to customers around the world, particular clients in South and Latin America?
We do not promote New Zealand trusts directly to customers around the world.
How thorough is your due diligence on new or prospective clients? These checks appear to be left to your own staff - is that adequate?
Our due diligence process is of a high standard and includes verification of identity and residence from independent sources.
We also typically obtain a report from a third party such as Thomson Reuters World-Check. If anything unusual is identified, additional information will be requested.
How often do you reject clients?
We have rejected a small number in the past where we could not be satisfied as to the integrity of the client or the legitimacy of source of funds.
This is generally due to not being able to obtain sufficient information rather than anything untoward.
What requirements are there to demonstrate - to your staff and authorities - what the trusts are being used for?
I'm not sure I understand this question. We comply with all New Zealand laws including anti-money laundering laws.
The customer is not required to sign any documents stating they won't use the trusts for unlawful purposes - is that sufficient?
Incorrect. We typically require confirmation as to the purpose the trust is being used for and the legality of any funds being transferred to the trust.
On how many occasions since 2014 have IRD had cause to raise concern about your clients?
I believe Inland Revenue's role is to ensure that New Zealand tax is properly paid and to also obtain information about New Zealand trusts when requested to do so by foreign tax authorities where there is an exchange of information obligation.
We have received a small number of such requests in the past and have always complied.
Can you confirm that you worked for IRD? What was your role?
I worked for Inland Revenue for a relatively short period after graduating from university over 30 years ago. I fail to see the relevance of your question.
Is New Zealand a tax haven?
No, in my experience I don't see New Zealand is a tax haven I would describe it as a high quality jurisdiction for trusts with a benign tax system in certain circumstances.
I think the assumption that all New Zealand foreign trusts are being used for illegitimate purposes is unfounded and based largely on ignorance.
Due to the information gathering powers of the New Zealand Inland Revenue Department I would expect that those looking to use trusts for tax evasion or other illegitimate purposes would choose alternative jurisdictions with secrecy laws.
Have you ever met John Key, Michael Woodhouse or Todd McClay? What was the nature or purpose of the meeting? Have you ever lobbied the government on tax legislation, regulation or compliance issues?
I met John Key once for a few seconds before he spoke at a national accounting conference.
This was before he became Prime Minister and we merely exchanged general pleasantries, there was no discussion regarding trusts or any specific tax issues.
I have never met Michael Woodhouse or Todd McClay and have never lobbied the government on tax legislation, regulation or compliance issues in any way relating to trusts and the taxation thereof.
I have made several submissions to the Finance and Expenditure Select Committee and appeared before the Committee twice on non-related tax issues, for example, the taxation of property developed for investment purposes and the portfolio investment entity (PIE) rules when those rules were initially proposed.
*The investigation into New Zealand links in the Panama Papers is a journalistic collaboration by reporters from RNZ News, One News and investigative journalist Nicky Hager, and with the assistance of the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung.