Air New Zealand wins Cook Islands tax dispute

Air New Zealand (NZ, Auckland International) has secured a NZD5.4 million New Zealand dollar (USD3.51 million) tax refund payment from the Cook Islands Collector of Inland Revenue after winning a High Court tax case.

Air New Zealand Limited vs the Collector of Inland Revenue was resolved in the airline's favour last year by the Cook Islands High Court but only now has the payment information emerged after that country's Ministry of Finance and Economic Management refused to do so last year, citing Air New Zealand's requested confidentiality clauses. As recently as last week, Cook Islands Prime Minister Mark Brown was declining to confirm the full amount of monies the small nation would have to refund the airline.

In the 12 months to March 31, 2022, the total GDP of the Cook Islands (resident population; 15,400) was NZD491.7 million (USD319.3 million). A self-governing island country within the realm of New Zealand, the country often relies on New Zealand for much of its logistical, operational, and financial needs. The Cook Islands government subsidised Air New Zealand a reported NZD100 million (USD64.95 million) over ten years to operate direct flights between Rarotonga and Sydney Kingsford Smith and Rarotonga and Los Angeles International. The onset of the pandemic ended those services. However, the attempt by the Collector of Inland Revenue to tax Air New Zealand on the subsidised flights backfired, with the court ordering not only a refund of taxes paid but payment of yet-to-be-disclosed legal fees and costs. Last week, Brown called it a tax refund. "We refunded the tax; it's a tax refund," he told the Cook Islands News. "You win some, you lose some."

Air New Zealand now only offers a single daily roundtrip flight between Auckland International and Rarotonga using a mixture of A320-200Ns, A321-200NXs, and B787-9s on peak days.

New Zealand's One News reports Air New Zealand's CFO Richard Thomson saying that the airline had been incorrectly taxed on certain payments from the government. "All income Air New Zealand receives from the Cook Islands Government will be subject to taxation in New Zealand," he said. "This decision reinforces the international tax rules around the taxation of international airlines." ch-aviation has approached Air New Zealand for further information on the matter.