CHAPTER 6

　　Update on Relevant Work in OECD on Tax Havens

　　The year 2000 has seen a great deal of international discussion on tax havens that had drawn attention to the Pacific area. OECD meetings have been held in Paris, followed by a meeting in July 2001 in Auckland between the OECD and Pacific Forum jurisdictions.

　　

　　A key item on the agenda of the Paris meetings was the OECD’s harmful tax practices project. The driving forces behind this project were the use of tax havens by firms and the competition of preferential tax regimes among member and non-member countries to attract capital that were harmful in the process of globalisation of trade and investment. Two OECD reports have been released so far on this in 1998 and 2000. As those reports outline, the objective of the project is to establish standards for how countries should work together in a world where tax systems of different countries are increasing inter-linked.

　　

　　The focus to date of OECD work has been on appropriate tax practices that OECD countries should adopt and the difficulties tax havens can create in the international tax area. The 2000 report identified a number of tax havens and sought their cooperation. The OECD report sought tax haven cooperation by way of their agreement to commit to:

　　

　　 • exchange tax-related information with the tax authorities of other countries;

　　 • make their tax laws transparent;

　　 • remove tax regimes seen as being targeted at undermining the tax systems

　　 of other countries.

　　

　　Since the release of the 2000 report, 33 jurisdictions[60] have made commitments to transparency and effective exchange of information and are considered co-operative jurisdictions by the OECD's Committee on Fiscal Affairs. The OECD has determined that three other jurisdictions (Barbados, Maldives, and Tonga) identified in the 2000 report as tax havens should not be included in the List of Uncooperative Tax Havens.

　　

　　The following jurisdictions, which have not yet made commitments to transparency and effective exchange of information, have been identified by the OECD’s Committee on Fiscal Affairs as uncooperative tax havens.

　　

　　 • Andorra

　　 • Liberia

　　 • The Principality of Liechtenstein

　　 • The Republic of the Marshall Islands

　　 • The Principality of Monaco

　　CHAPTER 7

　　Conclusion

　　Final Thoughts – Haven or hell? – You be the judge.

　　Tax havens draw mixed press: some think they are the answer to their taxation nightmare while others are put off by implications they are legally dodgy.

　　Setting up business in a tax haven is legal, but most New Zealand businesses choose not to because of our watertight taxation system.

　　There are a couple of strong deterrents against doing so. If we comply with our legal taxation requirements, we are not going to make more money basing our operations in a tax haven than we would in any other country. In fact, doing so can cost money, and if we get it wrong, legal penalties for incorrect or dishonest tax returns can range from 20% of the tax not paid for lack of reasonable care, to up to 150% plus imprisonment and fines for outright evasion.

　　So what are the rules? A business owner who is a New Zealand tax resident (living here for 183 days of the year or has a permanent home here) is subject to New Zealand tax on a worldwide income which includes: all personal income from overseas ventures; shares of profits from any foreign company they control more than 40% of; profits of any interest in a foreign investment fund; and distributions as beneficiary from any trust settled overseas.

　　Income from a tax haven can come from setting up either a trust or a company.

　　If a New Zealand resident controls the overseas company, it will almost always be taxed as if it were local with the income attributed to the New Zealand shareholders.

　　Setting up a trust isn’t any better. Generally, trusts set up by New Zealanders in a tax haven will be “non-qualifying” which means if we have set up property in a trust overseas and there has been no New Zealand tax on its income, the New Zealand beneficiaries of that income will pay tax rates of up to 39%. We can end up paying more than the top marginal tax rate and paying tax on capital gains.

　　None of the tax haven countries have a Double Tax Agreement with New Zealand, which simply means that most income from business done by the offshore entity in New Zealand will be fully taxable here. Therefore, setting up in a tax haven is no better, in principle, than structuring in any other overseas country.

　　Some tax havens have secrecy laws to conceal assets and income, which are arguably beneficial, but our tax system’s disclosure requirements are so comprehensive it pretty much cancels out any potential loopholes. We should also think about the effects of the OECD’s harmful tax practices project.

　　If we do need to set up offshore, investigate other structures such as accessing foreign tax credits. For example, where Australian business is conducted directly through a partnership in, say, Australia, the New Zealand partners may be able to use the Australian tax paid by the partnership as a credit against their personal tax bill.

　　Question how easily we can unwind our offshore structure. For example, Australia imposes capital gains tax on sales of shares in its companies and stamp duty on the sale of an Australian business out of an Australian company. However, there is no Australian tax on the sale of the sales in the New Zealand holding company of an Australian subsidiary.

　　But in reality, on the hidden side of the world, from OFFSHORE[61] :

　　“Multinationals are increasingly creating their own offshore economies across the world – separate, hidden, and virtually detached from national economies – with enough combined financial power to match the very biggest states.”

　　“A quick look behind the leaders of the Fortune 500 top global corporations shows the significance of the Caribbean offshore circuitry alone. General Motors aggregates its sales and leasing revenues in the Cayman Islands and its revenues from re-insurance and finance subsidiaries in Barbados. Exxon Mobil has eight holding companies in the Bahamas and Cayman alone. The Ford Motor Company’s re-insurance group is split between Cayman and Bermuda, while IBM has holding companies in Bermuda, the Bahamas, the British Virgin Islands, and Barbados. These subsidiaries are not out-of-the-way entities buried deep inside an Exxon or a Ford – far from it. Each Caribbean subsidiary is essential to the competitive financial enterprise of these $100 billion corporate giants …”

　　“Most of the global heavy hitters have offshore networks of tax-exempt and low-tax regimes, taking in a handful of the fifteen or so Caribbean tax havens and mixing them with the main European havens of Switzerland, Liechtenstein, and the Channel Islands, and perhaps even some of the remote Pacific Ocean hideaways such as Vanuatu, Nauru, and Niue. Publicly quoted companies always disclose the identities of at least a few of their offshore subsidiaries, to keep regulators off their backs, but these are merely the public froth that floats to the surface. Many thousands of others remain secret and unknown, linked up inside corporations in order to concoct and preserve financial firepower and competitive advantage.”

　　And from Winston Peters’ wine-box inquiry into the Magnum tax credit deal, follow THE PARADISE CONSPIRACY[62] :

　　“There was a phrase in one of the wine box documents – a $100 million BNZ pref share deal – to the effect that if the media or the Inland Revenue Department began snooping around, EP’s lawyers were to run legal interference and objections for as long as possible to give time for the transactions to either keep making profits, or presumably alternatively so they could be wound down and evidence wiped out – bearing in mind that IRD would find it virtually impossible anyway to penetrate tax haven secrecy laws in the Cooks.”

　　“…using a New Zealand Government bank as their flagship, they sailed the seas of global high finance under a tax haven’s jolly roger, their victims the taxpayers of an unsuspecting world…”

　　“As borders shrink and multinational corporations increasingly take control of the world’s economic destiny, it becomes easier for those in business to impose their wishes on Government whilst bypassing the ballot-box, which is why this story is relevant not just to New Zealand but to nations around the world.”

　　So, why do the developed countries tolerate the continued existence of tax havens? Can they not prohibit their taxpayers from using tax havens? They cannot do so, at least not without destroying their own capital markets. The fact is that every country, large and small, is a tax haven to some degree. For example, the US does not impose any income tax on the interest paid to foreigners on their US bank deposits, thus encouraging foreigners to leave their money on deposit. Billions of dollars would leave the US if this exemption were eliminated. The sudden loss of these funds might effectively destroy New York as a major capital market.

　　If US shipping companies could not use Panama or Liberia for some of their offshore activities, the US would not have an available merchant marine in the event of war or national emergency. By documenting their ships in these havens, US shipowners materially reduce their labour costs. In return, these countries have agreed to make the ships available to the US in an emergency. #p#分页标题#e#

　　When a large company needs to borrow money from abroad by issuing bonds, no one will buy the bonds unless they are free of tax. The country into which the borrowed money is flowing must either permit direct borrowing without imposing tax or it must tolerate the use of an offshore corporation to make the interest tax-free. Otherwise there would be no foreign funds available to borrow. This is the rationale behind the New Zealand Approved Issuer Levy Regime.

　　It is sensible for taxpayers to arrange their affairs legally in a way that subjects them to the least possible taxes. In view of the virtually confiscatory taxes that many taxpayers now face, it may even be imperative.

　　It is not the use of tax havens that causes government officials to wince. It is their abuse by people who try to evade taxes.

　　Evidence from overseas has, however, shown that, even with very comprehensive tax haven legislation and the influence of the international community such as the OECD, all tax haven transactions cannot be stopped. The conclusion must be reached therefore that tax havens will continue to flourish.

　　Appendix A:

　　List of Cooperative Jurisdictions by OECD

　　33 Jurisdictions Committed to Improving Transparency and Establishing Effective Exchange of Information in Tax Matters

　　

　　The 33 committed jurisdictions are :

　　

　　Anguilla Malta

　　

　　Antigua and Barbuda Mauritius

　　

　　Aruba Montserrat

　　

　　Bahamas Nauru

　　

　　Bahrain Netherlands Antilles

　　

　　Bermuda Niue

　　

　　Belize Panama

　　

　　British Virgin Islands Samoa

　　

　　Cayman Islands San Marino

　　

　　Cook Islands Seychelles

　　

　　Cyprus St. Lucia

　　

　　Dominica St. Kitts & Nevis

　　

　　Gibraltar St. Vincent and the Grenadines

　　

　　Grenada Turks & Caicos Islands

　　

　　Guernsey US Virgin Islands

　　

　　Isle of Man Vanuatu

　　

　　Jersey

　　

　　

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　　http://www.oecd.org/topic/0,2686,en_2649_33745_1_1_1_1_37427,00.html

　　

【注释】
　 60. See Appendix A – List of Cooperative Jurisdictions by OECD.　
　 61. Brittain-Catlin W., “Offshore : the dark side of the global economy”, (New York, Farrar, Straus and Giroux, 2005). 　
　 62. Wishart I., “The Paradise Conspiracy”, (Auckland, Howling At The Moon Publishing Ltd, 1995).