A positive Phase 2 Peer Review reinforces the strength of the Cook Islands' regulatory environment and commitment to meeting its international obligations. The OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes has just released its report on the Cook Islands titled "Peer Review Report Phase 2 Implementation of the Standard in Practice—Cook Islands". The report is the result of months of research and consultation by the Peer Review assessment team with stakeholders in the Cook Islands. The process was lead locally by Andrew Haigh of the Revenue Management Division of the Ministry of Finance and Economic Management, Paul Heckles of the Financial Supervisory Commission, and the Financial Services Development Authority ("FSDA").
"The positive report reflects all of the work of the Cook Islands in meeting its exchange of information obligations and modernising its laws in this area," says Andrew Haigh. The Cook Islands has 19 Tax Information Exchange Agreements in place and continues to develop more. The purpose of this Phase 2 Peer Review was to assess how the Cook Islands exchanges information for tax purposes in practice, using its network of tax information exchange agreements. Amendments to the Income Tax Act, made in 2011, set out the process by which such requests are to be handled.
Phase 2 involved a visit to the Cook Islands by a group of assessors from both the Global Forum Secretariat and other jurisdictions. The assessors reviewed any legislative developments since the country's Phase 1 Review (2012) and focused on the timeliness of exchanges of information and effectiveness of the systems for the monitoring and enforcement of the Cook Islands' exchange obligations. Paul Heckles says, "This is another example of the Cook Islands being independently assessed against important international standards and being found well up to the mark." It is expected that the Cook Islands will be further reviewed (Phase 3) in a few years time to ensure that the standards are maintained.
Ten Elements comprised the Phase 2 assessment including: ownership information, accounting records, banking information, powers of the competent authority to request information, evaluations of the tax information exchange agreements as well as how effectively information is exchanged in practice. The Cook Islands received 8 "Compliant" ratings, which are the highest ranking, and 2 "Largely compliant" ratings.
With respect to the two elements receiving the largely compliant rating, the FSDA says that these are easily fixable. "One element was rated lower due to the relatively low number of exchange of information requests received by the Cook Islands and this should increase over time, and with further requests, a compliant rating should be issued. The other element only requires some minor amendments to our international legislation. For example, the Foundations Act requires some penalty provisions to be inserted for non-compliance."
Andrew Haigh, who represented the Cook Islands at the recent Global Forum Peer Review Group meeting in Paris where the Report was ratified, said, "The process has been a lot of work for a jurisdiction as small as the Cook Islands but it is great to receive another positive report reinforcing the strength of our regulatory regime". Minister of Finance, the Honourable Mark Brown, was pleased to note that the Global Forum's webpage stated in the Report's Key Findings that "the Cook Islands has answered all requests for information from treaty partners in full and timely manner and peers are very satisfied with the Cook Islands as an exchange of information partner."
The Executive Summary of the Report can be found here or for the full Report visit http://www.oecd.org/tax/global-forum-on-transparency-and-exchange-of-inf...