Cook Islands Tax and Trust Disputes

Tax disputes

The Cook Islands (“CI”) tax system is based largely on older New Zealand tax legislation. The Income Tax Act 1997 provides a regime for the assessment and collection of Income Tax from companies and individuals based on rules of residence and source. The collection and management of taxes is in the hands of the Collector of Revenue who is an official of the Treasury under the Ministry of Finance and Economic Management.

Despite the connection of tax legislation to New Zealand, there are important differences between the way tax disputes are conducted in New Zealand and the CI. The Collector in the CI is able to assess, triggering obligations of payment and rights of collection, without going through a pre-assessment process such as is required in NZ. It is not unusual for taxpayers, especially those that are operating internationally in the CI, to find themselves facing swift action by the Collector. That is a reflection of the importance that is placed on revenue collection by the CI Government whose resources are not great.

Assessments are disputed by the lodgement of an objection, which must normally be filed with the Collector within six weeks of the assessment. If the objection is not upheld an appeal by way of Case Stated lies to the CI High Court and then to the Court of Appeal. The Judges of both Courts are retried judges from the senior NZ Courts. A final right of appeal lies to the Judicial Committee of the Privy Council in London.

Geoff Clews is one of the few Tax Barristers admitted permanently to the CI Bar and has argued cases before the CI Courts on matters such as the administrative powers of the Collector, the exchange of information between CI Revenue and other jurisdictions, the application of the capital/revenue distinction to airline operations and the apportionment of income having a source in the CI and elsewhere. In addition he has advised CI commercial taxpayers extensively on withholding tax issues and the international trusts industry on other recent tax reforms. He is often instructed by NZ companies experiencing tax issues in the CI.

International trust disputes

The CI has positioned itself as an international financial centre and has a comprehensive legislative regime governing the establishment and operation of international trusts and companies. While this part of the financial sector has experienced growing pressure over issues such as disclosure, it and the CI Government has striven to retain positive standing with organisations such as the OECD.

Because Trust structures settled in the CI often hold valuable assets in any number of jurisdictions, disputes often involve parties in different countries with competing interests that need to be resolved under CI law.

A perceived advantage of the CI trusts jurisdiction is that the relevant law is based on settled principles of English trust law and the Courts administering it are staffed with experienced and credible jurists from NZ. NZ trusts counsel are able to speak the “right language” in this environment on behalf of international clients.

Geoff Clews has acted in a number of international trusts matters, including trust disputes affecting significant family interests in Hong Kong and Singapore, and issues over access to trust information affecting parties in Sweden and Argentina.

If you have a tax or trusts issue in the CI contact us.