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Cook Islands has been removed from an international “grey list” of countries who have failed to clean up their tax regimes.
It comes after Parliament got rid of a tax break for international companies registered here, requiring they pay domestic company taxes and a tax on company profit of 20 per cent. It also stopped issuing special insurance licences for such companies.
International companies already registered for the tax exemption can keep claiming it until 2022.
The law change also does away with specific tax concessions on “development” investment and a tax exemption on revenue from certain public works, both of which were regarded as “harmful” because they were granted as government discretion.
The European Union had given Cook Islands until the end of 2019 to reform certain tax regimes. After passing a suite of laws last year, it was deemed to have complied with international standards and last week, was promoted to the “white list” of countries regarded as cooperative on tax laws.
Finance Minister Mark Brown said Cook Islands had at all times worked “openly, honestly and constructively” with the European Union to meet the commitments it had made.
Cook Islands would undertake “a thorough review” of its tax system this year, including how it taxes company income.
“In addition we will be exploring the introduction of a territorial tax system, consistent with those currently implemented in many jurisdictions, as well as other measures to ensure the Cook Islands remains internationally competitive and attractive to those wishing to do business here.”
A territorial system taxes companies based on the location of profits rather than their corporate residence. This means that overseas companies who earn their profits in Cook Islands would also pay taxes here.
Many countries are now applying such tax regimes to internet giants like Google, Facebook and Amazon, which had previously paid negligible tax on their vast earnings around the world.
Cook Islands Financial Services Development Authority chief executive Alan Taylor said the removal of the country from the European grey list was “excellent news” for Cook Islands.
“It is critical it avoids being placed on prominent international blacklists due to the reputational and economic harm that could result,” he said.
“The EU’s list is a prominent list that is expected to influence both international financial institutions, organisations and foreign governments in the formulation of their own lists and risk profiles which may negatively impact a country’s correspondent banking relationships and its ability to conduct international transactions.”
In 2017 the European Union Code of Conduct Group had notified Cook Islands Government that it had identified “preferential and harmful” tax provisions on our law books.
Cook Islands missed the December 2018 deadline to clean up those laws, because the inconclusive 2018 election results delayed Parliament sitting. So the European Union extended the deadline to December 2019.
Twelve countries are on the European Union blacklist: American Samoa, Fiji, Guam, Oman, Panama, Samoa, Trinidad and Tobago, the US Virgin Islands Vanuatu and – as of last week – the Cayman Islands, Palau, and Seychelles.
SOURCE: COOK ISLANDS NEWS/PACNEWS
Pacific Islands News Association
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