We have previously commented on the proportion of foreign land purchases and the potential for the New Zealand government to implement a foreign ownership register (see our previous post here). Our trans-Tasman neighbours have previously signalled their intention to create such a register but this process has been held up by difficulties in achieving cohesion between the different states and the federal government. As a single state territory it would appear that the process in New Zealand would be much more simple. However, a recent article highlights that local privacy laws and the Bill of Rights Act may create obstacles to any proposed register.
The article reveals that LINZ has been looking into a ways that foreign ownership could be recorded and that a number of options have been covered (see the article here). Under the current frameworks, there may be some scope to allow for voluntary disclosure of ownership, but any compulsory reporting measures would require consultation with a number of departments and potentially amendments to legislation.
The largest issue around creating an accurate register is that buyers can (generally) structure ownership to hide identities (or to place nationality in a favourable jurisdiction). Accordingly, any accurate register would need the ability to look to the ultimate owners of trusts and companies. The issue of ‘ultimate ownership’ is one that the legislature has struggled with for a long time and in a number of areas (relationship property, company law and taxation, to name a few). The position is difficult as there are compelling arguments both for and against looking through these types of structures. A current example where the legislature has implemented provisions to enable them to look through certain structures to the ultimate owners is the Overseas Investment Act 2005. This provides a number of criteria for determining who the ‘relevant overseas person’ or ‘individual with control’ and these provisions are phrased in very general language.
Another question that remains to be answered is why New Zealand would require a foreign asset register? And further, whether it should relate to all investments or only those in land.
While a register may provide an accurate source of information (subject to the issues already identified ), it is unlikely that a register alone will change behaviour.
We are keen to hear any thoughts on the merits of an overseas investment register, or any of the areas discussed above.