The country has joined 124 other countries in the Inclusive Framework on base erosion and profit shifting (BEPS), the Organisation for Economic Co-operation and Development (OECD) announced earlier this month.
By joining the framework, the OECD said the Cook Islands had pledged to implement minimum standards on countering multinational tax avoidance and improving tax dispute resolution. This resolution was agreed to by the OECD, G20, and other countries in 2015 as a result of the OECD/G20 base erosion profit-shifting (BEPS) project.
Cook Islands’ senior tax advisor and acting collector Fraser Hawkins said it was very timely and positive for the Cook Islands to be joining the Inclusive Framework given the rapidly changing nature of e-commence around the world.
Hawkins said addressing base erosion and profit shifting (BEPS) had been a priority of governments around the world since the OECD and its member states developed a 15-point Action Plan over a number of years and adopted a single set of consensus-based international taxation rules.
He said the international tax system continued to change rapidly and individual tax jurisdictions were increasingly challenged by the digital economy and its ability to move effortlessly across national borders for conducting commerce.
“The Inclusive Framework brings together over 125 tax jurisdictions and by joining, the Cook Islands intends to engage with the 15-point Action Plan to adopt the BEPS package and ensure the protection of the tax base while offering certainty and predictability to taxpayers,” Hawkins said.
“For the Cook Islands, as an example, a significant proportion of economic activity is conducted by investors, and businesses who operate both locally and internationally. Whenever such investments and economic activities are conducted across national boundaries beyond the Cook Islands then efficient taxation administration depends upon the good collaboration of the other national jurisdictions involved.”
The process for becoming a member of the Inclusive Framework requires achieving minimum standards within the BEPS package, Hawkins said.
Examples of these standards include, ensuring tax transparency, safe guarding against international treaty abuses, reporting to foreign countries on certain economic activity by foreign nationals and adopting standards on cross-border tax planning arrangements, he added.