Cook Islands: Executive Summary

Cook Islands Executive Summary

The Cook Islands are a self-governing parliamentary democracy in a loose constitutional association with New Zealand. The Queen is Head of State and New Zealand has a High Commissioner. There is a Prime Minister and a cabinet appointed from among elected members of parliament. The population of 22,300, ethnically similar to New Zealand Maoris, occupies widely scattered islands in the South Pacific half way between New Zealand and Hawaii. The time zone is 10 hours behind GMT. The capital, Avarua, on Raratonga Island, has direct flights to Los Angeles, Hawaii, New Zealand etc. The climate is tropical and there are typhoons in summer.

The economy is import dependent and loose fiscal policies led to 'bankruptcy' in 1996. Some recovery has followed Government cut-backs and assistance from New Zealand. Exports include copra, pearls and fruit. The tourist industry is vital, and the offshore sector is the second biggest source of government revenue. The currency is the New Zealand dollar. There are no exchange controls. Unemployment and inflation are low. There are significant investment incentives available to foreign-owned businesses. The law is based on English common law.

Local taxation consists of a 20% corporation tax, and personal income tax at rates up to 30%. There is VAT of 12.5% and there is Stamp Duty. Withholding tax on payments to non-residents is 15% and from September 1, 2011, a final withholding tax of 15% applies to interest payments. The Cook Islands have no double taxation treaties, but 15 Tax and Information Exchange Agreement have been signed since 2009.

The offshore sector began quite early in 1981 and there are special regimes for banks, captives and trust management, which is the biggest offshore sector. Offshore companies and trusts do not pay any taxes except for Stamp Duty. Confidentiality is tight, except in cases of criminal activity, which does not include fiscal crime.

FATF Blacklist

In June 2000, the Cook Islands was blacklisted by the FATF as a non-cooperative and harmful tax haven.

In September 2000 the Cook Islands parliament passed the Money Laundering Prevention Act, which provides for the setting up of a Money Laundering Authority, to consist of the government's financial secretary, the commissioner for offshore financial services and the commissioner of police.

In 2003 a series of nine new measures were introduced in the Cook Islands Parliament over the regulation of domestic and offshore financial industries after the cabinet approved the work of an Anti-Money Laundering/Counter Financing Terrorism Committee. The measures include a Financial Transactions Reporting Act, which require all banks to report local and international money transfers to a central financial intelligence unit.

The Cook Islands were removed from the FATF's list of NCCTs in February 2005. The FATF said that a recent visit had confirmed that the jurisdiction was effectively implementing anti-money laundering (AML) measures.

The Cook Islands was 'white listed' by the OECD in September 2010 as a jurisdiction which had "substantially implemented" the internationally agreed tax standard.

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