Foreign-owned trusts based in New Zealand will be required to disclose more information when registering, which would allow regulatory authorities to search the register.
The trusts would also have to file annual returns, Finance Minister Bill English and Revenue Minister Michael Woodhouse said this afternoon.
The inquiry by former PwC chairman John Shewan also recommended changes to New Zealand's anti-money laundering rules.
His report said that foreign trusts were legitimate vehicles, but that disclosure rules needed to be strengthened.
"The inquiry concludes that the existing foreign trust disclosure rules are inadequate," Mr Shewan's report said.
"The rules are not fit for purpose in the context of preserving New Zealand's reputation as a country that cooperates with other jurisdictions to counter money laundering and aggressive tax practises."
Mr Shewan recommended a "significant" increase in the amount of information disclosed when trusts were first set up.
Annual reporting and increased enforcement would also address the issues raised in his inquiry, he said.
In theory, New Zealand's tax disclosure rules and anti-money-laundering rules should be enough to deter tax abuses and ensure funds held in foreign trusts were from legitimate sources, the report said.
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"However, under current law and enforcement practices the risk of detection by authorities is low.
"The inquiry considers that the disclosure requirements can be justifiably described as light-handed."
Mr Shewan found no evidence of illicit funds being hidden in New Zealand-based foreign trusts.
"However, based on the work undertaken, including a review of IRD files, the inquiry considers it is reasonable to conclude that there are cases where foreign trusts are used in this way."
The current legislative settings, regulations, and disclosure rules created "both the potential and the environment for this to occur", Mr Shewan concluded.
