Press Release – New Zealand Government

New Zealand Prime Minister John Key and Cook Islands Prime Minister Jim Marurai signed a Tax Information Exchange Agreement between their two countries as part of international efforts to strengthen cooperation in this area.

Hon John Key
Prime Minister

10 July 2009 Media Statement

Cook Islands agree to tax information exchange

New Zealand Prime Minister John Key and Cook Islands Prime Minister Jim Marurai signed a Tax Information Exchange Agreement between their two countries as part of international efforts to strengthen cooperation in this area.

Mr Key met with Mr Marurai in Rarotonga today on the final leg of his four-country Pacific visit.

Mr Key and Mr Marurai also agreed to an annual Joint Ministerial Forum that will further strengthen the special relationship between the Cook Islands and New Zealand.

“Regular high-level political engagement between our two countries will play an important role in assisting the Cook Islands in developing its economy and also reflects the strong Realm relationship that underpins our partnership.”

Mr Key highlighted New Zealand’s increased official development assistance funding to the Cook Islands which will increase from $11 million to $14 million this year.

“This assistance, delivered through NZAID, will focus on support for activities which contribute to sustainable economic development.

“A vibrant and well-supported private sector is an essential building block for growth. We want to support initiatives that encourage small business development, entrepreneurship and investment.

“I’ve also discussed New Zealand’s desire to increase funding for infrastructure support. We are particularly interested in building on assistance for the management of lagoon eco-systems to preserve them for the enjoyment of local communities and overseas tourists alike.

“Tourism is the key foreign exchange earner for the Cook Islands economy and continued strength in this sector is dependent on keeping important air routes open

“New Zealand has agreed to support the Cook Islands Government’s decision to underwrite any loss on Air New Zealand’s weekly Los Angeles-Rarotonga-Auckland route, with a capped $1 million contribution from the aid programme for the current financial year.”

New Zealand’s bilateral aid programme with the Cook Islands will increase to $14 million in 2009/10 and 2010/11, then $17 million in 2011/12.
(Briefing note attached)

New Zealand/Cook Islands TIEA
1. Tax Information Exchange Agreements (“TIEAs”) are bilateral international treaties that establish a mechanism by which tax officials can request tax records, business books and accounts, bank information, ownership information, and other tax related information from each other for the purpose of detecting and preventing tax avoidance and evasion. In the absence of a treaty, countries are generally constrained by domestic law from divulging tax-related information to other jurisdictions.

2. New Zealand and other OECD member countries have been engaged in negotiations for TIEAs with tax havens since 2004. Progress has been slow, however, because tax havens generally see little benefit in a TIEA for themselves. (To date, New Zealand has signed two TIEAs, one in 2007 with the Netherlands Antilles, the other in April of this year with Bermuda.) In December 2006, following the approach adopted by other OECD member countries, the previous Government agreed to a package of “benefits” that New Zealand can offer to tax havens as an inducement for signing up to TIEAs.

3. The Cook Islands is included on the OECD’s list of tax havens. Negotiations for a TIEA with the Cook Islands have now concluded, with the Cook Islands accepting the New Zealand benefits package.

4. The key element of the New Zealand package comprises supplementary articles that allocate taxing rights in respect of pensions, government service and students, and that establish a mutual agreement procedure to help resolve transfer pricing disputes. These supplementary articles are included in a stand-alone agreement.

5. Cabinet approved New Zealand’s signature of the TIEA and Supplementary Agreement on 6 July. Once signed, the TIEA between New Zealand and the Cook Islands will be their first. We are aware that Australia is also close to finalising a TIEA with the Cook Islands.

ENDS

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