John Key MP
National Party Finance Spokesman

2 August 2006

Huge concern at capital gains tax bill

More than 3,500 submissions have been received on the Government's bill introducing a capital gains tax on many overseas share investments, says National Finance spokesman John Key.

"Usually a tax bill gets about 50 submissions, if you're lucky.

"The number of submissions on this bill shows the overwhelming level of concern people have about the Government introducing a capital gains tax on their savings.

"IRD estimates that about 20,000 people who have shares in companies in the US, Britain and five other 'grey list' countries will be hit by the tax.

"They will also be hit by substantial compliance costs. This is a complex system to understand, and advice from accountants is that it could cost affected people some $500 in accounting fees each year. That makes a total of $10 million in costs, and all for a measly $8 million in taxes for the Crown.

"And it's not only these 20,000 people who will be hit by the capital gains tax. Anyone who has savings - no matter how small - in funds which directly or indirectly make passive investments in those grey list countries will also be affected.

"That's potentially hundreds of thousands of ordinary savers.

"The Government expects the tax grab from these passive investments to total a far more substantial $45 million.

"National opposes this new tax grab by Labour, and we expect that almost all of the submissions to the select committee will oppose it as well."

Attached: PQs 08857 and 08858

8857 (2006). John Key to the Minister of Revenue (14 July 2006):
Further to his answer to question for written answer 06581 (2006), how much of the $27 million revenue gain from changing the tax rules on collective investment vehicles in relation to their share investments outside New Zealand and Australia is revenue from taxing passive funds on share gains; what explains the balance of this $27 million revenue gain, if there is one?

Hon Peter Dunne (Minister of Revenue) replied: The revenue estimates relating to changing the tax rules for collective investment vehicles in relation to their share investments outside New Zealand and Australia are based on Funds that currently pay tax only on dividends (generally "passive funds") paying approximately an extra $45 million in tax each year under the new rules, while other managed funds would pay approximately $18 million less in tax each year.

8858 (2006). John Key to the Minister of Revenue (14 July 2006):
What is the Inland Revenue Department's best estimate of the number of people currently holding shares costing more than $50,000 in companies resident in grey list countries, excluding Australia?

Hon Peter Dunne (Minister of Revenue) replied: Inland Revenue estimates that about 20,000 taxpayers have shares costing more than $50,000 in companies resident in grey list countries other than Australia. It is emphasised that this is an estimate based on limited information.

ENDS

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