MFEM has released a progress update on the implementation of the 2013 Tax Review, which outlines that 27 of the 31 recommendations have been implemented. Outstanding issues include funding and recruitment of a Tax Outreach Officer; implementing online tax returns; the delay in the increase of NCD goods duties until 1 January 2015.
The full report can be obtained from the MFEM website.
The changes resulting from the tax reform were aimed at simplifying the system and ensuring that the Cook Islands has a competitive regime which remained simple and equitable. The Tax Foundation is an American tax research organisation which publishes the International Tax Competitiveness Index. The index aims to compare a country’s overall tax environment particularly in terms of investment and how to start and how to grow a business.
According to the Tax Foundation, New Zealand ranks as the second most competitive tax system among the developed nations.
Elements that counted in New Zealand’s favour were a progressive income tax with a relatively low top tax rate of 33 per cent, a broad based VAT (99 per cent coverage) with few exceptions, the forth lowest VAT rate in the OECD, relatively low corporate tax rate of 28 per cent, an infinite loss carry forward for business, credits for tax paid in foreign jurisdictions, and property taxation based on land values.
New Zealand also has no property taxation (apart from local Rates), no capital gains tax, no inheritance taxes, and no gift taxes.
“The confirmation of New Zealand as one of the world’s most competitive tax systems would suggest that the Cook Islands tax system would also be rated extremely highly if we were included in such a ranking.” Said MFEM Economic Advisor James Webb.
“There are many similarities between the Cook Islands and New Zealand tax systems. Like New Zealand, we have no inheritance taxes, no capital gains tax, we allow for tax paid on overseas income, and we allow for loss carry forwards for businesses in the same way.
Also, our VAT is almost identical to New Zealand’s GST, with a relatively low rate and a broad coverage.
One could even argue that elements of our system are even more competitive: our income taxes are actually lower (our top rate is only 30 per cent), and our corporate tax rate for local firms is only 20 per cent (compared to New Zealand’s 28 per cent).
We can still make improvements to our tax system, but it’s reassuring to know that we have moved down the right track to making our tax system one of the most competitive in the world.”
For the full press release please visit our Press Release page.