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March 05, 2019

NZ will share tax information with more countries in a bid to combat tax evasion

NZ will share tax information with more countries in a bid to combat tax evasion

The New Zealand government is to add 30 territories to the list of 60 countries it currently has a tax information sharing agreement with.

The Cook Islands, Turkey, Pakistan, and Nigeria, plus tax havens Panama and Switzerland, are among the countries named. 

“‘Tax evasion’ refers to illegal and intentional actions taken by individuals or firms to illegally reduce their tax obligations,” writes James Alm in his IZA World of Labor article, Tax evasion, labor market effects, and income distribution

“Individuals can evade income taxes by underreporting income; overstating deductions, exemptions, or credits; failing to file tax returns; or engaging in barter. Most often these actions concern individual income tax, but corporate and other taxes can also be the object of tax evasion.”

The move by the New Zealand government is part of the Automatic Exchange of Information (AEOI)—a global standard providing for the exchange of non-resident financial account information with the tax authorities in the account holders’ country of residence.

Revenue Minister Stuart Nash says the addition of the extra countries, “reflects increased international co-operation by OECD and G20 countries to crack down on tax evasion.”

Alm writes that, “The most obvious impact of tax evasion is that it reduces tax collections, thereby affecting the taxes that compliant taxpayers face and the public services that citizens receive.” 

He further explains that tax evasion sets in motion a range of general equilibrium adjustments—the interactions of supply and demand across multiple markets in an economy—as individuals and firms react to the changes in incentives created by evasion. Alm advises that “A full analysis of the effects of tax evasion, and so of the incidence of taxation, must recognize and incorporate these … adjustments.”

The expansion of the list should help “to ensure all New Zealanders pay their fair share of tax, including those who have financial interests in other countries,” said Nash.