Cook Islands Condemns OECD Tactics, Takes Up Seat On International Taxation Task Force

Cook Islands Government

22 January 2001

This story has been reproduced by kind permission of the Cook Islands Government at http://www.cook-islands.gov.ck

The Cook Islands will occupy one of two places reserved for the Pacific Islands on an international Task Force to try and work out a new process to tackle global taxation issues.

The Prime Minister Dr Terepai Maoate says the Cook Islands will face tremendous pressure as a result of this role but the Task Force represents important milestones for the country and the international community as a whole.

"I am happy with the outcome," was his message from Barbados yesterday.

The Task Force Working Group is the key outcome of a meeting between the Organisation for Economic Development and Cooperation (OECD) and Offshore Financial jurisdictions like the Cook Islands, which concluded in Barbados on Tuesday, January 16.

The outcome of the High Level Consultations on the OECD Harmful Tax Competition Initiative also represents the only middle ground where the OECD and jurisdictions (non-OECD) were prepared to progress further on the debate over an imposed timeline toward blacklisting and sanctions over 'harmful tax practices' by 'tax havens'.
Cook Islands' representation on the 13-member Task Force will bring the country back to the negotiating table with the OECD, this time in London before the end of the month.

The Cook Islands had earlier kicked off another round of stinging attacks on the OECD Harmful Tax Competition Initiative in the morning of the final day of talks, with the Prime Minister delivering a statement that leveled a number of criticisms against the OECD approach.

"The Cook Islands does not sit comfortably with a selective morality, which jeopardises future cooperative consultation and the sovereign right to develop and implement policies," he told the conference before receiving a round of applause from delegates opposed to the OECD Initiative.

The 29-member country OECD, which was dominated by Treasury and Tax representatives rather than Ministers, took a heavy battering over two days for failing to consult the broad international community on 'harmful taxation' and formulating its own definitions to label the Cook Islands and 34 other jurisdictions as 'tax havens'. The OECD criteria placed the jurisdictions on a timeline to conform to certain standards it had set or face 'defensive measures' - widely interpreted by the jurisdictions as a clear threat of sanctions.

Dr. Maoate, who was one of two Prime Ministers present, said the Barbados meeting was the "first real evidence of consensus-building". It was also the first opportunity that the Cook Islands had to openly voice its concerns to the international community and place on record Government's refusal to make any commitments to the OECD, or sign any documentation to conform, such as a proposed Collective Memorandum of Understanding, without having in place internationally agreed definitions and a unanimous position by the OECD itself.

The Cook Islands joined several Caribbean countries in calling for a new beginning to the process of considering international tax matters. The OECD had argued it was not opposed to tax competition and that it was not taking a threatening stance against the non-OECD members - the small country jurisdictions. However, OECD representatives conceded there were failings in explaining their 'project'. In addition, explanations why certain members of the OECD like Switzerland were excluded from the 'tax haven' list were not convincing.

The two-day consultations in Barbados provoked fierce debate amid nearly 50 countries, territories, and organisations, and revealed polarised positions by the interested parties. The final day however, moved toward a middle position to focus on the creation of a Task Force Working Group that would revisit the process that had been adopted by the OECD.

It was agreed that the group would be tasked with seeing if it can arrive at a new process that would in effect remove the process originally taken up by the OECD. A further task for the group is to begin consideration of forming an acceptable global tax forum.

The Prime Minister said the Task Force Working Group initiative was significant because all the concerns have been placed squarely on the table for discussion and it has successfully kept all the interested parties engaged in reaching common goals. Dr. Maoate said it was the only way to ensure global cooperation in working toward acceptable international taxation standards. The Cook Islands needed to become involved from the very beginning, he said, because of the perceived threat by the OECD Initiative and the crucial role that the offshore finance industry plays in the wider scheme of national economic development planning and policies.

The Task Force group is comprised of six OECD countries (France, Ireland, Japan, Netherlands, UK, and co-chair Australia), two each from the Commonwealth (Malta, Malaysia), Caribbean Community (co-chair Barbados, Antigua and Barbuda), and the Pacific (Vanuatu, Cook Islands), and one from the Overseas Territories Group (British Virgin Islands). The Cook Islands will be represented in London by Commissioner for Offshore Financial Services Mathilda Uhrle.

The Cook Islands delegation to Barbados was led by Dr. Maoate, and consisted of Financial Secretary Kevin Carr, Mathilda Uhrle, and the Prime Minister's Assistant Chief of Staff Trev Pitt.

During his four-day stay in the Caribbean, the Prime Minister joined Ministers and representatives in social functions hosted by Barbados Prime Minister Owen Arthur - the Chairman of the High Level Consultations. Dr. Maoate also took time to tour the island to experience the island's progressive tourism developments.

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