8 February 2006

John Key National Party Finance Spokesman

Another tax backdown coming from Govt

The Government is setting the stage to back down on its earlier misguided attempt to impose a capital gains tax on Kiwi investments offshore, says National Party Finance spokesman John Key.

He is referring to a speech today by Revenue Minister Peter Dunne in which he says the Government is consulting on a modified tax proposal after "almost all" the submissions on the original were "overwhelmingly negative".

The proposal is to tax capital gains on Kiwis' investments offshore. Some 80-90% of Kiwis who invest offshore do so in so-called 'grey list' countries like Australia and the US, which offer the greatest tax advantages.

Mr Key says National opposes the capital gains tax but the modified proposals could be just as bad.

"They got 900 submissions on the original proposal, which the Government now admits were overwhelmingly negative.

"Worryingly, I understand they are now proposing a cumbersome plan to tax earnings per share, to replace the proposed capital gains tax.

"The problem with this new plan from officials is that there are many ways of calculating earnings per share. It's something few people understand properly and it's very technical.

"Creating a new tax around such a complex financial measurement would be fraught with difficulty. Adding a complicating twist like this to what was already a bad idea is silly.

"National welcomes the partial backdown. It shows that Peter Dunne - in contrast to Finance Minister Michael Cullen - is at least prepared to listen.

"But there is no rationale for taxing Kiwi investments offshore at all. It simply discourages savings.

"The Government needs to get its mind off a revenue-collecting agenda and onto a simplification agenda," says Mr Key.

ENDS

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