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Government ‘misled’ people about NZ tax agreement

Sunday December 22, 2013 Written by Published in Tropical Chronicles

Much shame should befall the government and its political leaders. The Prime Minister Henry Puna, his deputy PM Teariki Heather and Minister of Finance Mark Brown should all hang their heads low for lying through their teeth to Grey Power and the people of the country.

Grey Power, with much respect to their restraint, had been pleading with the government not to charge them back tax and also not to tax them for their pension from New Zealand. For all as far back as we know, back to the start of the portability of the New Zealand pension for Cook Islanders that had worked in that country, the Cook Islands government had never taxed them for such income. That’s because previous governments were keeping a promise to such pensioners to bring their money back to the Cook Islands and spend it here. Such income brings to the country over $5 million, a substantial contribution by something like more than 300 people. Come this new government, they launched an attack on defenceless, elderly, immobile (in some cases) people to haul in an average of $5000 each individual for what was calculated to be their due “kaiou” (debt).

The government has come up with a number of excuses as to why it will have to collect such taxes. These excuses were voiced by both the Minister of Finance and the secretary of finance, and both of them revelled in the fact that for the first time they have tapped into “dead certain” revenue for the government. Both obviously did not read all necessary information and both relied on that legal prerogative to tax and collect that was vested in the collector of revenue. When pressed by the opposition and of course by Grey Power, they resorted to the 2009 agreement signed by former Prime Minister Jim Marurai.

This agreement was not a tax agreement per say as are the country to country tax agreements between the Cook Islands and many other foreign countries. It was different because it was between two countries in “close relations” with each other and with a long history of the Cook Islands being a colony of New Zealand. It was also different because it had a pension component in it because Cook Islanders are New Zealand citizens and they are entitled to the New Zealand pension (superannuation), which they can take home to the Cook Islands and collect.

Of great interest with the “Jim Marurai” signed agreement is Article 5 entitled “pensions”. Paragraph one of this article says that pensions and other remuneration paid to an individual resident of a “contracting party” shall be taxable only by that contracting party. In other words if you reside in NZ your NZ pension will be taxed. It seems to me that the NZ pension shall be taxed only in NZ. The key word in it is “resident”. If you are “resident” in NZ, only the NZ government will tax you for your pension.

Paragraph two is more applicable to persons resident in the other contracting party (in this the case the Cook Islands). Pensions and other payments to them shall be taxable only by the Cook Islands government. In other words New Zealand will not tax pensions paid from New Zealand to eligible Cook Islanders living in the Cook Islands. That’s because they are residing in the Cook Islands. Again residency is pivotal.

Paragraph three is, however, the defining paragraph. It says very clearly that “Paragraphs 1 and 2 SHALL NOT apply where the pension or other similar remuneration is not subject to tax by the contracting party of which the individual is a resident. That means, NZ will not tax NZ entitled pensioners living in the Cook Islands, a point this government were at pains to point out.

As I said at the start of this column this is shameful and deceptive. Right now I see that pensioners with money in the banks are now being “raided” of their accounts by the Inland Revenue department to pay their back tax. It is another shameful act of robbing the poor and elderly.