15 Jul 2011

Cooks PM defends additonal tax in new budget

5:47 pm on 15 July 2011

The Cook Islands Prime Minister Henry Puna is defending the government's decision to reintroduce a withholding tax.

The 15 percent tax, which was removed ten years ago, will be restored on September the 1st and is expected to generate one million New Zealand dollars in 12 months.

But the Bankers' Association and the opposition doubt the tax will collect the projected revenue and are worried it will discourage people from saving.

Mr Puna says he believes the negative reaction is due to ill information and says many people do not fully understand what it is.

"We were caught at the last minute before the presentation of the budget, with a situation that really compelled us to consider our options. The option was to cut the budget - cut the appropriation for the ministries and possibly some of our people lost their jobs. And the other one was to look at measures that would affect a few and therefore spread the pain across some of our people."

Henry Puna says cabinet had no hesitation in choosing the latter but says it is only a temporary measure which may be withdrawn in two years.