The New Zealand Government has taken a number of steps in the last month to extend its network of overseas tax information exchange agreements.
In October, Revenue Minister Peter Dunne announced that the Government intends to pursue a FATCA (Foreign Account Tax Compliance Act) agreement with the United States. The FATCA was enacted by the United States in 2010, and requires overseas financial institutions (including, for instance, New Zealand banks, life insurers and managed funds) to enter into agreements with the US Internal Revenue Service (IRS) and US Treasury to provide details about the affairs of their United States clients in the aim of preventing US persons from hiding income and assets overseas.
Concluding a FATCA agreement with the United States would mean New Zealand financial institutions can provide the information to New Zealand's Inland Revenue Department instead of having to provide it to the US IRS. The IRD will then submit the data on institutions' behalf to the IRS. Once FATCA takes full effect, and in the absence of a FATCA agreement, the US will impose a 30% withholding tax on an institution’s American income, and there would be risks of conflict between elements of FATCA and New Zealand's privacy and human rights laws.
A joint working group comprising officials and private sector representatives is being formed to work through FATCA issues. Organisations that may be affected by FATCA can find out more about participating in the working group here.
Dunne also announced in October that New Zealand has signed the multilateral Convention on Mutual Administrative Assistance in Tax Matters. Dunne said that signing the multilateral Convention was another important step for New Zealand in the fight against tax evasion. Once incorporated into domestic law, the Convention would allow Inland Revenue to request information from other tax authorities and enable Inland Revenue to seek assistance in collecting outstanding tax debts from absconding taxpayers who move overseas. 42 countries have now signed the Convention, and 10 others have formally signalled their intention to sign. The Convention has been open to countries other than OECD or Council of Europe members since 2010.