Guardians of NZ Super confirm the fund used Appleby, the law firm at the centre of the Paradise Papers release outlining widespread use of tax havens; NZ Super confident 'no negative commercial implications' for it

The NZ Super Fund has confirmed it used the law firm at the centre of the global ‘Paradise Papers’ document release highlighting how the rich and powerful have utilised tax havens.

But is says it’s confident that there will be “no negative commercial implications” for the fund from the breach. It does say however, that a fund subsidiary is mentioned in the papers.

Earlier this week Prime Minister Jacinda Ardern said she was seeking more information on the papers and issues raised by them.

The Guardians of New Zealand Superannuation, the manager of the NZ Super Fund, said on Wednesday it had previously used Appleby, the law firm at the centre of the ‘Paradise Papers’ document release.

“The Guardians has used Appleby to assist it with local Bermudan law advice in respect of re-insurance contracts and establishment of separate accounts to hold re-insurance products as part of the Fund’s natural catastrophe reinsurance mandates with external investment managers Elementum Advisers (2009/11) and Leadenhall (2013),” a release from the fund said.

“At this point Appleby is unable to confirm whether or not there has been a security breach of the Guardians’ documents. However, given the nature of the work Appleby undertook, the Guardians is confident there will be no negative commercial implications for the Fund from the potential breach.

“Based on information from the IRD, the Guardians also understands that a wholly owned Fund subsidiary, “NZSF Private Equity Investments (No. 1) Limited”, is mentioned in the papers as a Limited Partner of Coller International Partners V (CIP V). Appleby was advising Coller in respect of this transaction, not the Guardians.

“CIP V is a leading private equity fund which has commitments from almost 200 of the world’s leading financial investors including U.S. state pension plans, sovereign wealth funds and insurance companies. The NZ Super Fund committed USD30 million to the USD4.8 billion Fund in February 2007 to provide access to the secondary segment of the global private equity sector. The investment has largely been realised, at an attractive return, and the NZ Super Fund’s residual interest in CIP V was therefore held at zero value in its 2017 financial statements.

“Appleby, as a law firm with numerous global clients, is also likely to have advised other parties with which the Guardians has dealt,” the fund said.

It said the use of collective investment funds domiciled in locations such as the Bermuda and the Cayman Islands “is legal, common and widely considered best practice portfolio management”.

“The collective investment fund provides a tax-neutral jurisdiction to ensure its collective income does not pay a second layer of foreign tax in relation to income on which all applicable taxes have already been paid at source. New Zealand income tax is also paid by the Fund on income from the collective investment vehicles. The Fund fully complies with its tax obligations both internationally and in New Zealand.  For the 2017 financial year it was the largest New Zealand taxpayer, paying a record level of New Zealand income tax of $1.2 billion.

“The Guardians requires collective investment funds in which the NZ Super Fund invests to provide full tax transparency and information exchange for tax purposes, and compliance with all relevant laws. The NZ Super Fund does not invest in schemes or arrangements that use secrecy laws to conceal assets and income that are subject to tax, or which create false tax deductions.

“The Guardians has a Cooperative Compliance Agreement with the IRD. Under this agreement we disclose tax positions taken on Fund activities, including the tax treatment of new investments, to the IRD, before we file our tax return. In this way we can be confident that the IRD agrees with our approach before we file our return.

“Further detail on the Guardians’ approach to tax is available in its 2014 Annual Report at pages 70-71.”

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