National's Key opposes portfolio tax

National's finance spokesman John Key opposes Government plans to introduce a capital gains tax on portfolio investment in Australia and other exempt countries.

The proposal would apply to individual investors and "passive" index-tracking funds that own less than 10 per cent of a foreign company. At present if the company is resident in Australia, Canada, Germany, Japan, Norway, Britain or the United States, the investors pay tax in New Zealand only on the dividends they receive.

Under the proposed changes, that "grey list" of favoured countries will be abolished. Tax will apply not only to dividends but to any increase in the value of the investment each year - whether sold or not.

Key told financial planners yesterday that there was no financial rationale for the Government to introduce yet another tax.

"This will only lead to less diversification for Kiwi investors and, long term, that can only be a bad thing."

It would lead to investors pulling out of foreign sharemarkets and either replacing those investments with offshore property investments or bringing their money home.