In a move that will please the country's banks, Revenue Minister Todd McClay has parked New Zealand in the slow lane alongside Australia in the implementation of a major global push to crack down on tax evasion.
McClay said today New Zealand's timetable for participation in the so-called global automatic exchange of information (AEOI) aimed at cracking down on tax evasion would be aligned with Australia's.
“New Zealand intends to align its timetable with Australia’s and begin exchanging information on a voluntary basis from 2018, aiming for mandatory reporting in 2019. This will give New Zealand’s financial industry enough time to comply with the initiative," said McClay.
“The automatic exchange of information initiative will set a global standard for sharing information. It will operate much like the recently introduced US Foreign Account Tax Compliance (FATCA) Act where financial institutions will provide information on account holders’ financial assets to their local tax authority.”
The AEOI involves the Group of 20 (G20) and Organisation for Economic Co-operation and Development (OECD). The OECD describes the initiative as a "step-change" in tackling and deterring cross-border tax evasion.
As reported by interest.co.nz in September, an OECD Secretary-General report to G20 finance ministers noted more than 60 countries and jurisdictions had committed to the AEOI's implementation, with about 40 having committed to a "specific and ambitious" timetable leading to the first automatic information exchanges in 2017.
Early adopters include India, several European countries including Germany and France, South Africa, the United Kingdom, the UK's Crown Dependencies of Isle of Man, Guernsey and Jersey; and the UK's Overseas Territories of Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat, and the Turks & Caicos Island. Their timetable sees the first exchange of information taking place by the end of September 2017.
New Zealand Bankers’ Association chief executive Kirk Hope told interest.co.nz last month the later New Zealand implemented AEOI the better.
“One of our key concerns is getting the implementation date right. We think the later the date the better. This will give the banking industry more time to adapt and draw on experience gained through FATCA," said Hope.
The AEOI will involve the annual automatic exchange of financial account information between governments that enter into an AEOI agreement. In contrast the current situation involves the exchange of information on request. A global standard for AEOI establishes what information needs to be exchanged, the types of accounts and taxpayers covered, who will need to report and the common due diligence procedures financial institutions will be required to follow.
Financial information covered includes all types of investment income including interest, dividends, income from certain insurance contracts and other similar types of income, and also account balances and sales proceeds from financial assets.
The financial institutions dragged in include banks and custodians, and also other financial institutions such as brokers, and "certain collective investment vehicles and insurance companies," plus accounts including those held by trusts and foundations, with "an obligation to look through passive entities to the individuals controlling these entities."
Earlier this year the National-led government signed an intergovernmental agreement with the US on FATCA, which has the stated aim of targeting tax evasion by US taxpayers with assets hidden offshore. It requires overseas financial institutions to identify and report information on accounts held by US persons or risk a 30% withholding on US sourced income.
The government agreed to implement rules that require New Zealand financial institutions to comply with FATCA obligations. In exchange, the US government agreed to treat all New Zealand financial institutions as "deemed compliant."
Although FATCA was the catalyst for AEOI, the multilateral version will tax based on people's residency rather than citizenship. This means reporting should only be required for people who are tax resident in other countries, not merely because they have a non-resident citizenship status.
McClay said New Zealand firmly supports the global move to counter tax evasion.
“Tax evasion respects no borders so global co-operation is the way to combat it. Sharing information is a powerful weapon in that fight,' said McClay.
*Here's an OECD video where AEOI is described as "the end of banking secrecy as we have known it."
3 Comments
Gareth, please don't compare AEOI with FATCA. AEOI is a multilateral, voluntary agreement implemented to a timetable decided by each nation entering the agreement. FATCA is a one way unilateral cramdown on every country in the world by the United States with strict, non-negotiable implementation deadlines and threats of 30% sanctions on domestic financial institutions for non-compliance with the US extra territorial law. AEOI reporting is only on non-resident persons and entities and therefore does not abrogate the privacy rights of New Zealanders. FATCA requires financial institutions to report the private financial details of New Zealand residents (and their spouses and business partners) to a foreign government on no suspicion of wrong-doing, thus over-riding the Privacy Act and subverting those persons rights to unwarranted search and surveillance and discrimination under the Bill of Rights Act (not even admitted by our government). Other than the direct costs of implementation, AEOI will not reduce the New Zealand tax base. FATCA is sweeping up tens of thousands of New Zealand Citizens and residents with US connections (birth, parentage or green card) into a nightmarish dragnet that is forcing them to comply with previously unknown, and unenforced US diaspora taxes. The United States laws tax these New Zealanders on income earned in New Zealand and assets situated in New Zealand without protection from the NZ-US DTA, depleting our tax base in the process. Todd McClay, the NZBA and the IRD Tax Policy Dept have no idea what they are getting into with FATCA. In the rush to sign the IGA to bail out the banks, they have not only caused personal harm to the tens of thousands of Kiwis affected, they have opened the door for the United States to deplete our tax base on an ongoing and increasing basis, all paid for by New Zealand taxpayers and with no benefit to New Zealand whatsover (Please don't mention the faux promise of US reciprocity). It is interesting that the United States is NOT one of the 51 jurisdictions that have signed the OECD agreement as they "will be undertaking automatic exchanges pursuant to FATCA from 2015". Anyone that knows anything about FATCA and the IGAs knows that no information of any value will ever flow out of the US under FATCA. The US is the biggest tax haven in the world and they plan to keep it that way, but that won't stop them stealing from other countries treasuries by stealth using FATCA as the weapon and the global crusade against tax evasion as the justification.
Fair enough, you aren't directly comparing them in the article. However, there seems to be a perception that AEOI is based on FATCA when in reality it has almost nothing in common with it, other than a document template that can be modified for similar due diligence procedures and other wordsmithing.
The intent, implementation, cost and effect on individuals, banks and domestic legislation have almost nothing in common.
If AEOI is so wonderful and nations are falling over themselves to get on board, why do they not insist that the US abandons FATCA and adopts AEOI like everyone else?
Your article states that FATCA was the catalyst for AEOI. That may be true, but it is also the catalyst for the future erosion of a portion of New Zealand's tax base which will be confiscated by the United States on an increasing annual basis. Isn't one of the Minister of Revenue's jobs to protect New Zealand's tax base? If so, he has failed miserably by agreeing to FATCA.
Does nobody care that a portion of New Zealand's income and assets will be seized by the US Government to be used as they see fit - and we will assist them in the process by identifying the targets and picking up the tab?
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