Cook Islands Tax Amnesty Proposal Raising Thorny Questions

Chartered accountants, Chamber of Commerce object to government move

By Florence Syme-Buchanan

RAROTONGA, Cook Islands (Cook Islands News, Jan. 12, 2017) – Government's surprise announcement of a tax debt write-off will allow repeat offenders and abusers of the system to benefit over those who do meet their tax obligations.

And chartered accountants spoken to by CI News warn that prime minister Henry Puna’s pre-Christmas declaration of a tax amnesty is actually a “forgiveness of debt”, something he is not legally authorised to do.

That’s because under the country’s tax laws, only the Collector of Taxes, Andrew Haigh, has the power to make individual tax write-off decisions.

CI News has been told that the discretion of past and current Collectors to write off taxes, including late-payment additions, has not applied to recidivist defaulters. Some of the repeat and ongoing offending by local companies goes back almost 20 years.

The country’s tax debt currently stands at around $33 million [US$23 million]. No denials were made by the Office of the Prime Minister that the proposal for the controversial tax “amnesty” was initiated by deputy prime minister Teariki Heather, a principal of T&M Heather Ltd, the country’s largest civil works contracting company. The company has already been given some leeway in past years, with additional tax not being charged or remitted.

Chartered accountants who spoke to Cook Islands News on the condition of anonymity, pointed out that if the “amnesty” was in fact Heather’s proposal, it is a blatant conflict of interest, and Cabinet should immediately have thrown it out.

Sources say the fact that it was considered, approved and declared by the prime minister suggests the tax forgiveness plan is intended to benefit other Cabinet ministers, high profile Cook Islands Party business people and others connected to the Office of the Prime Minister (OPM).

[PIR editor's note: On Jan. 12, 2017 Cook Islands New reported that 'Taxation is a requirement of any democratic state in order to provide the services expected of government by the people, and without which the existence of our country will be put in jeopardy, says Chamber of Commerce president, Steve Lyon. ... “Taxation is one of these, and as such follows a set of rules: how much is the tax to be paid, who pays the tax to whom and when it should be paid. Governments operations are virtually impossible without taxation. ... “Tax rules are developed through a thorough process, and to tamper with these rules without due consideration for equity could endanger the entire Cook Islands economy.... It could undermine the integrity, confidence and foundation of what government is, and how the Cook Islands is perceived by prospective investors, donor partners in the region and the rest of the world.”']

“A lot of businesses have used the tax department to finance their businesses, rather than the traditional and expected bank source,” said one chartered accountant.

All of the sources spoken to believe the list of who will benefit from the tax write off cannot be allowed to remain confidential.

Said one chartered accountant: “Confidentiality has already been sidelined with the prime minister having acknowledged on television and the media that he has listened to and read some stories from moaning tax defaulters.”

The chartered accountant suggested that Puna may not have availed himself of consented agreement to read the tax departments files on the “bleeding heart” stories which would, in most cases, have shone a different light on the matter.

 “It would have been frequently revealed that the tax moaners had been given multiple write-offs already and still continued to be late or non-payers.” 

He added that the “moaners” had not only been dishonest with their taxes, but also dishonest to the PM with their stories.

CI News has been told that senior tax officials have found it difficult to believe the “unable to pay tax” stories of several defaulters when their wealthy lifestyles do not reflect this.

“Most tax defaulters have already been treated reasonably and have been able to strike agreements with Revenue Management for partial write-offs where appropriate. Some still don’t keep their end of the bargain, said another chartered accountant.

“These tax evaders must be laughing now that Revenue Management has been given the green light to write off any unpaid penal tax.

“If someone can’t pay taxes, the Collector has the power to assist the situation, to look at the facts and write some or all of this off and give a taxpayer the chance to continue. This system has been competently administered by the tax office in favour of taxpayers who have arrears including additional tax, for many years.

“Another highly unpalatable aspect is that in his December 24 announcement, the prime minister invited tax defaulters to also go into Revenue Management and argue to be let off their core tax in addition to his so-called “penalties” which is an absolute misnomer. 

“That is placing a very unfair burden on Revenue Management staff.

“There is no way the Minister of Finance, let alone the PM has the power to make individual write-off decisions.”

The chartered accountant said he believed it was not credible that an across-the-board remission of additional tax for all late payers, some of whom are long-term non-payers, can be justified as policy. 

“It is meddling in the operational matters of the tax office and overriding the senior staff there.”

Haigh and other senior Revenue Management staff are understood to have resisted the tax amnesty proposal. Sources say Financial Secretary Garth Henderson also wasn’t keen on the blanket tax write-off.

To date, Henderson, Haigh, senior tax advisor Phil Eyre and newly-appointed OPM media adviser Thomas Wynne have not responded to three sets of emailed questions about the proposed amnesty. Wynne said a media statement on the subject would be released late last week, but it did not eventuate.

Finance minister Mark Brown is understood to be having a “media event” tomorrow, but exactly what the “event” will involve, has not been clarified.

Cook Islands News
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