Cook Islands – Wonderland in the South Pacific

 

It is said roughly one-half of Australia’s top 200 companies have subsidiaries in tax havens.  Australia, like the United States, is a high tax jurisdiction with a corporate tax rate in 1993 of 39% corporate rate is a flat rate (no separate income brackets apply) levied on all assessable income from within or without Australia.

 

But, the Australian government was not always so incredulous in its tax collecting manner. Up until a few years ago Australia did not tax most capital gains, nor did it tax foreign source income (even if derived from a low-tax haven), provided the income was not totally exempt in the source country, and provided the income did not originate in the UK, New Zealand, Japan, the Netherlands, West Germany, France or Belgium. While tax rules have changed for the worse; even as I write Australia’s top executives are finding lucrative loopholes in the Australian tax code to exploit.

 

Recently, the flagship company of Australian entrepreneur Alan Bond – the Bond Corporation – (which had just sold its stake in Mr. “Tiny” Rowland’s Lonrho) declared a tax free profit of A$152,800,000. Most of the profit appears to have been generated in the tiny Cook Islands, a Pacific tax haven, formerly a New Zealand dependency but now independent. With a revamped Companies Code  allowing for total tax free operations, the Cook Islands are fast becoming an attraction for tycoons and tax haven Robinson Crusoes like Alan Bond.

 

Accessibility, Communications

 

The Cook Islands consist of 15 South Sea islands south of Hawaii and due west of Polynesia. Formerly, part of New Zealand, the country became a self-governing democracy in 1965, with Queen Elizabeth II as head of state. Growth as an offshore financial center was spurred on by flexible legislation, coupled with a responsible approach by the Government which created and administer such legislation. The CI Government is very much committed to developing the islands as a tax haven base for foreigners, and imposes high standards on the Licensed Trust Companies, which do much to administer the offshore statutes.

 

Rarotonga International Airport is shared by Cook Islands International Airlines and Hawaiian Airlines. These airlines provide links to New Zealand, Auckland and Sydney, Australia, Fiji, Honolulu, Tahiti and Samoa.

 

Excellent international telecommunications (telephones, facsimile, telex and direct dialing system) have been introduced. Postal and courier services are said to be reliable.

 

Tax System

 

An altogether separate tax regime exists for offshore entities. Such regimes run parallel to the domestic onshore legislation, but it is the offshore jurisdiction which provides the generous tax free environment within which international companies, partnerships and trusts may operate freely, and in which many offshore banks and insurance companies are registered. There are no taxes, exchange controls, stamp or other duties imposed on offshore entities. There are no reporting requirements.

 

International Companies (ICs)

 

Offshore companies, similar to the International Business Corporations (IBC) used by the Caribbean tax havens, can be formed under the International Companies Act 1981-82 (ICA). Also authorized to register under this act are foreign companies incorporated outside the Cook Islands.

 

The IC Act contains provisions which permit the company to repurchase their own shares, issue bearer debentures, make gifts, issue bearer shares, distribute profits to non-shareholders and effect redomiciliation in and out of the Cook Islands. Only one shareholder is needed to form a CI company.

 

The ICA grants that no Act of the Cook Islands Parliament shall impose “any (i) liability, duty, responsibility, obligation or restriction; (ii) any fee, impost, tax, levy, dues, duty or excise; or (iii) any fine or penalty on an international or foreign company.

 

Shares in a Cook Island International Companies need not have a par value and may be designated in one or more world currencies. Redemption of shares may be effected from capital, and fully paid shares may be cancelled and bearer obligations issued in their place. A company needs only one director, and it is not a requirement that he be a resident. A resident secretary is required who must be an officer of a licensed trust company.

 

Foreign companies seeking to register as a foreign company must lodge certain basic information with the Registrar and provide a registered office, which must be the principal office of a trustee company in the Cook Islands.

 

International Trusts are created pursuant to the International Trusts Act 1984 (ITA). At least one of the trustees, donors or holders of a power of appointment must be an international or foreign company or a trustee company. CI trust laws are based on UK common law trust principles, but are more streamlined and less cumbersome to work with.

 

The underlying legal system is based on English Common Law as applied to the islands by the Cook Islands Act of 1915. The Cook Islands owe their affiliation to Captain James Cook (1728-1779), English navigator and explorer.

 

Confidentiality – Acts of Parliament

 

Confidentiality is provided in the form of a special penal code. Inspection and search of registers is restricted to company officers, members, debenture holders, and others with written consent of a director, liquidator or Registrar. Government officials are not immune to these restrictions.

 

Acts of Parliament provide the legislative parameters for the offshore jurisdiction. These include the Trustee Companies Act of 1981-82, International Companies Act, 1981-81, Offshore Banking Act 1981, Offshore Insurance Act, 1981-82, International Trusts Acts 1984, Cook Islands Monetary Board Act 1981, International Partnerships Act 1984, and the Development Investment Act 1977.