A flamboyant Malaysian financier linked to an international money-laundering probe has laid bare New Zealand’s surprising appeal as a destination for the ultra-rich to park their wealth.
Family members of Low Taek Jho, who is suspected by U.S. officials of diverting money from 1Malaysia Development Bhd., are beneficiaries of New Zealand trusts holding $265 million in assets including a Bombardier jet, a luxury Beverley Hills hotel and a penthouse in the Time Warner Center in Manhattan, according to court documents. The family is fighting the U.S. Justice Department’s bid to seize the assets. Jho Low has said he provided consulting to 1MDB that didn’t break any laws.
The case has shone a spotlight on a multi-billion dollar trust industry in New Zealand that allows foreigners to hold assets with minimal disclosure.
While Prime Minister Bill English’s government has committed to tighten rules around trusts and legislation is before parliament, the opposition wants it to do more to safeguard the image of a nation that tops global transparency rankings.
The opposition Labour party is calling for a public register of assets and their beneficiaries, which could lead to an exodus from the industry as the mega wealthy seek to protect their privacy.
Panama Papers
“The government’s ongoing complacency risks seeing our reputation damaged,” Grant Robertson, Labour’s finance spokesman, said by e-mail. Such a register would “give the public increased confidence that New Zealand is protecting its reputation and joining other countries in cracking down” on the trust system.
The complex corner of New Zealand’s tax system came under scrutiny last year following the “Panama Papers” leak, with local media reporting more than 60,000 references to the nation in the documents from law firm Mossack Fonseca.
New Zealand, which is regarded as the best nation along with Denmark on Transparency International’s corruption perceptions index, and also tops the World Bank’s ease of doing business ranking, allows non-residents to use trusts established in the country to hold assets and wealth, with no tax payable on offshore earnings. There is also no stamp duty, gift duty or other such charges applied.
The legislation aims to tighten light reporting requirements. The name of the beneficiaries of the trust, their nationality, source or value of funds have not had to be declared to the New Zealand Inland Revenue.