The Government has released an issues paper on New Zealand's implementation of an OECD initiative the OECD claims will "end banking secrecy as we have known it."
The OECD's Automatic Exchange Of Information (AEOI) initiative is setting a global standard for sharing information between countries with the aim of reducing tax evasion. AEOI will require financial institutions to provide information on account holders’ financial assets to their local tax authority.
“AEOI is aimed at countering tax evasion, and will be an important new means for recovering lost tax revenue and improving transparency in tax matters,” says Revenue Minister Michael Woodhouse.
“But we need to ensure that it is implemented in the most efficient manner for New Zealand, so I’m pleased we are now going through this important public consultation process.”
The new rules impose due diligence and reporting requirements on banks and other entities including brokers, custodians, collective investment vehicles, managed entities and insurance companies.
“We will have a phased implementation, with 1 July 2017 as the start date for financial institutions to conduct due diligence and reporting requirements on all new accounts. This will allow Inland Revenue to start exchanging information with other tax authorities by September 2018, in line with the international requirements," says Woodhouse.
An OECD video promoting the AEOI says the OECD and G20 have developed a common reporting standard that calls on governments to obtain a wide array of information from their financial institutions and exchange it automatically on an annual basis.
"Automatic exchange of information will be a potent tool in the fight against tax evasion. If governments no longer need to ask for information but can get it automatically, there will be no where for tax cheats to hide. It's the end of banking secrecy as we have known it," the video suggests.
FATCA influenced
Although US Foreign Account Tax Compliance Act (FATCA) was the catalyst for AEOI, the multilateral version has significant differences. These include that it 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.
In another key difference, AEOI requires each implementing jurisdiction to introduce a domestic compliance regime whereas with FATCA a withholding tax regime applies in the US to encourage FATCA compliance.
"Jurisdictions that implement the AEOI Standard (participating jurisdictions) receive information on the financial assets and income from those financial assets held by their tax residents in offshore accounts. The tax authorities of those jurisdictions can then use that information to verify that those residents have correctly reported their financial assets and income for tax purposes," the Government's issues paper says.
"To date, all G20 member countries, all OECD member countries, and all but three of the jurisdictions that have or operate as an international finance centre, have already entered into implementation commitments."
"The benefit to New Zealand from implementing AEOI lies in the information that it will receive from other participating jurisdictions about the financial assets and income of New Zealand residents in those jurisdictions. This information will be used to detect current tax evasion and deter future tax evasion. Perceptions of a fairer tax system can also generally be expected to enhance voluntary compliance domestically. However, AEOI implementation will impose compliance costs on financial institutions. Possible transitional measures and mitigation of compliance costs are therefore a critical part of our thinking, and we invite any suggestions in this regard," the issues paper says.
IRD notes that AEOI will involve the reporting and exchange of sensitive personal and financial information. "Understandably" taxpayers will be concerned about risks to privacy from the reporting and exchange of their financial information. Especially, IRD suggests, that information reported to IRD and exchanged with other jurisdictions is subject to high standards of confidentiality and data protection.
"Addressing these concerns is essential if support for the initiative is to be maintained."
The timetable
The G20 has set a deadline for the first exchanges of information of September 30, 2018, arguing jurisdictions that fail to meet the implementation timetable will see "the tax evasion problem" relocate to their jurisdiction. The deadline applies to all OECD members, plus other jurisdiction that have, or do operate as, international finance centres.
New Zealand banks have lobbied for this country's AEOI to be as late as possible, and not before Australia's.
"The Government decided on 15 February 2016 that New Zealand will implement AEOI on a timeline that would allow Inland Revenue to start exchanging information with other tax authorities by September 2018, in line with our international obligations under AEOI. Due diligence and reporting requirements for financial institutions will begin to apply from 1 July 2017, rather than from 1 January 2018 as earlier indicated," IRD says.
This timeline is the same as Australia's and Canada's.
Here's IRD's proposed phased implementation.
• New Zealand reporting financial institutions commence applying due diligence procedures in respect of all non-exempt new accounts. (In broad terms, “new” accounts will be accounts opened on or after 1 July 2017.)
Early or mid-2018
• New Zealand reporting financial institutions complete due diligence reviews of all non-exempt High Value Pre-Existing Individual Accounts.
30 Mid-2018
• Reporting financial institutions complete their reporting to Inland Revenue in respect of reportable accounts and undocumented accounts identified in respect of the due diligence carried out in the period.
30 September 2018
• Tax administrations complete the exchange of information in respect of information reported during 2018.
Early or mid-2019
• New Zealand reporting financial institutions complete due diligence reviews of all non-exempt pre-existing entity accounts.
• New Zealand reporting financial institutions complete due diligence reviews of all non-exempt low value pre-existing individual accounts.
Mid-2019
• New Zealand reporting financial institutions complete reporting to Inland Revenue in respect of reportable accounts and undocumented accounts identified in respect of the due diligence carried out in the period.
30 September 2019
• Tax administrations complete the exchange of information in respect of information reported during 2019.
"A key point to note is that under this approach, the initial focus is solely on completing due diligence reviews of high value pre-existing individual accounts and new accounts (opened in the first period). That is, the deadline for completing due diligence reviews of pre-existing entity accounts is the same as that for completing due diligence reviews of low-value pre-existing individual accounts. The due diligence reviews of entity accounts is expected to be more complex than due diligence of individual accounts. (Please note that these procedures and terms are elaborated on in the Appendix and Glossary to this issues paper.)," IRD says.
"A second key point under the above approach is that the deadline for completing due diligence of high value pre-existing individual accounts is itself likely to be deferred. Under the G20 indicative timing, these reviews would need to be completed by 31 December 2017. However, given that the first deadline for reporting the information is mid-2018, officials are exploring the option of allowing until mid-2018 for the completion of the due diligence reviews. We expect that this would reduce compliance costs."
The Government has called for submissions by March 31. See all our AEOI stories here.
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10 Comments
If you had an APT tax you wouldn't need all this expensive consultation, collection and compliance......would you.....this has nothing to do with tax cheats and is nothing but an attempt by the global politicians and bureaucracies to revisit historical controls used against humanity!!!
Fatca has been in force in NZ since June 1, 2014. Apart from this news site, very little has been discussed publicly in NZ about this policy. NZ has ceded fiscal sovereignty and granted senior taxing authority to a foreign power (USA) who are allowed to use the NZ financial institutions to identify NZ citizens who are also US citizens and residents living in NZ. As things currently stand, FATCA and NZ's IGA allows the IRS to enter NZ and arrest NZ citizens and take them to a US prison. Privacy rights have been trampled on in NZ with this policy. All NZders are losing their right to privacy with this policy. And there has been no public debate about this. This policy (FATCA) and the OECD version of it, is Orwellian and totalitarian. The reason this is happening now is that Western governments are broke. They allowed their banks to collapse the financial system so severely, that sovereigns are now in debt to the tune of tens of trillions of dollars (USD). They know they cannot hold this system together much longer (witness the new bail-in policy recently made legal of bank depositors across Europe and the proposed bail-in of European government bond holders). There is also a move to remove cash from the system, allowing governments and their financial agents to control the financial system further electronically. I welcome a public debate on this next push to expand the OECD taxing authority. But like FATCA, I fear this will not result in a public debate, but rather lead to the imposition by government on NZ citizens of a further invasion and loss of privacy as well as increased 'due diligence' costs.
FATCA is all about money, and the US trying to minimise their tax losses, which are huge.
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Nobody's going to prison just yet.
FATCA does not apply to new Zealanders, only to 'US persons'.
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The first thing Banks are required to do, is report monies on deposit for 'US persons'. The second thing they're required to do, is levy 30% tax on any interest earned and pay it to the IRS.
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One of the very obvious reasons governments are broke, is because of massive, wide scale tax evasion, by the extremely wealthy, and by behemoth companies like Google and Apple..
Any legislation which seeks to increase transparency into the murky world of offshore bank accounts, is to be applauded.
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Wrong. FATCA does apply to New Zealanders. If you have a US parent, were born in US or have ever had a Green Card you are a 'US Person' and will have all your assets reported to them. Probably 50,000 Kiwis in this category.
And FATCA applies to all of us, as we are ALL picking up the bill to implement this invasive legislation for no benefit to our country.
Because i am too addicted to money therefore i search everyday for new methods that can generate cash from the very new paypal money adder that i had heard for the first time when i used it.
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