Fiscal Regime

In preparation of future revenue from seabed mineral activities, the Cook Islands have begun the process of developing a mining tax regime, and has received assistance from the Commonwealth Secretariat and PFTAC in this regard.

A seabed minerals fiscal is aimed to be established which will provide the Cook Islands a fair and equitable share of the economic value generated from seabed minerals activity while enabling investing mining companies to obtain a return commensurate with industry norms and the risk undertaken.

In designing a mining tax regime there are a number of principles to consider, in addition to the usual efficiency, fairness, and ensuring fiscal sustainability. These principles include:

 - ensuring the state as resource owner receives an appropriate share of the economic rent generated from the natural resources;
 - in obtaining that share, the government needs to balance its desire to maximize revenue against any deterrent this may have on investment;
 - the government’s share should be adjustable so that it gets a larger share of the most profitable projects (that is, it can easily adjust to variations in circumstances such as price fluctuations);
 - the tax rules should be simple and clear, and preferably be set out clearly in the tax law (to ensure transparency and equity, and facilitate administration and compliance); 
- and the tax arrangements should be stable to provide certainty for long-term investors.

The Commonwealth Secretariat Economic and Legal Section (ELS) undertook a Seabed Minerals Fiscal Regime Analysis for the Cook Islands in 2012. ELS provided recommendations for Government to consider in the development of its mining fiscal regime to ensure it is consistent with international practice and Government-investor expectations.

The fiscal regime has been passed in Parliament and is to be administered by the Ministry of Financial Economic Management (MFEM).
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