Government taking a new look at investment tax plans

Revenue Minister Peter Dunne signalled yesterday that the Government will modify controversial plans to change the tax treatment of portfolio investment offshore.

The Government was listening to concerns and consulting on a modified proposal to be announced next month, Dunne said in a speech to the Financial Planners and Investment Advisers Association.

More than 800 submissions had been received about the proposals released in a discussion document in the middle of last year to overhaul the tax rules on investment income.

The submissions generally supported the proposals relating to domestic investment, which would scrap the capital gains tax that applies when such investment is made through actively managed funds.

But Dunne said the offshore proposals were overwhelmingly not supported by submitters.

The contentious proposal would tax people who invest directly in overseas shares, above a $50,000 threshold, on unrealised annual gains in the value of those shares. It would scrap the favoured treatment under current rules for investment in seven "grey list" countries including Australia.

The Government hoped to introduce the new regime in a tax bill in May, with application from April 1 next year, Dunne said.

National's finance spokesman John Key said National opposed the capital gains tax but the modified proposals could be just as bad.

"There is no rationale for taxing Kiwi investments offshore at all," he said.