Prime Minister John Key has signed a Tax Information Exchange agreement with Cook Islands Prime Minister Jim Marurai as part of efforts to clamp down on tax evasion and avoid another wine-box affair.

Revenue Minister Peter Dunne said the Tax Information Exchange Agreement provides for full exchange of information on criminal and civil tax matters between the two countries.

"The agreement will enable the tax authorities of both countries to gain access to information about income and assets that would-be evaders try to hide in the other country," Mr Dunne said.

He said the agreement will cover "not only information held by banks and other financial institutions but also information on who benefits in company ownership chains and on the settlors, trustees and beneficiaries of trusts".

Aside from their natural beauty, the Cook Islands are also well known in New Zealand for the ‘wine-box’ affair, under which New Zealand businessmen used the laxly regulated Cook Islands banking system as a tax shelter.

Mr Key met Mr Marurai on the main island of Rarotonga today on the final leg of his four-country Pacific visit.

The two prime ministers also agreed to an annual Joint Ministerial Forum to further strengthen the “special relationship” between the Cook Islands and New Zealand.

A protectorate of New Zealand until 1965, the 20,000 residents of the Cook Islands are dwarfed by the 58,000 Cook Island Maori who exercise their right to live in New Zealand.

Mr Key said regular high-level political engagement between the two countries will help the Cook Islands in developing its economy, while reflecting the strong Realm relationship that underpins the partnership.

Perhaps not coincidentally, New Zealand also increased official development aid to the Cook Islands from $11 million to $14 million this year, rising to $17 million over 2011/2012.

“This assistance, delivered through NZAID, will focus on support for activities which contribute to sustainable economic development”, said Mr Key.

“A vibrant and well-supported private sector is an essential building block for growth. We want to support initiatives that encourage small business development, entrepreneurship and investment.

“I’ve also discussed New Zealand’s desire to increase funding for infrastructure support. We are particularly interested in building on assistance for the management of lagoon eco-systems to preserve them for the enjoyment of local communities and overseas tourists alike.

“Tourism is the key foreign exchange earner for the Cook Islands economy and continued strength in this sector is dependent on keeping important air routes open.

“New Zealand has agreed to support the Cook Islands Government’s decision to underwrite any loss on Air New Zealand’s weekly Los Angeles-Rarotonga-Auckland route, with a capped $1 million contribution from the aid programme for the current financial year.”

You can view the full text of the agreement here.