The case of Revenue Management vs. Beachcomber Ltd. took place in the High Court and focused on the sale of goods to tourists as set out in the Value Added Tax Act 1997. The retailer, Beachcomber Ltd., claimed that over-the-counter sales to tourists were not liable for VAT because they came under the "zero-rating" provisions of the Act as goods for use outside the Cook Islands.

According to CINews, the judge decided that all goods and services sold in the Cook Islands are subject to the 12.5 per cent VAT regardless of whether or not they were purchased by tourists. The claim by Revenue Management, the government's tax department, was for CI$42,485.80, plus additional tax, which according to CINews calculations amounts to about CI$30,000 of penalty tax for non-payment. The total tax payable came to in excess of CI$70,000.

Although the Revenue Management's policy is normally not to publicly comment on court taxation cases, this case was the 'first of its type which has gone before the courts on the "zero rating" provision of the VAT Act.'

Treasurer of Revenue Management, Geoff Stoddart, told CINews: 'With tourism being the mainstay industry of the Cooks, if visiting tourists did not pay VAT, which makes up approximately 45 percent of the tax revenue, then the Crown Revenue could have been undermined had the court decision not been in favour of the Revenue Management office.'

He added: 'The Chief Justice's decision was important for the community and business sector as a whole, as it heightened awareness of the law and the need for businesses to comply.'