16 Jul 2011

Cook Islands PM says no choice over controversial withholding tax

9:46 am on 16 July 2011

The Cook Islands Prime Minister says his government had no choice over a decision to introduce a withholding tax that continues to generate a furious public response.

Henry Puna says the negative response over the tax, which will divert 15 percent of the interest on all bank deposits to the government from September, is largely based on misinformation.

Mr Puna says what he's been trying to explain to his people is that the government was caught before presenting the recent budget with a situation where it was compelled to consider its options.

"The option was to cut the budget, cut the appropriation for the ministries and possibly some of our people lose our 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. And cabinet had no hesitation in choosing the latter."

Henry Puna says the other thing people must understand is that the government is obliged by law to present fiscally responsible budgets, which rules out deficit budgets.