David Cunliffe told media yesterday that the 15% capital gains tax his party is proposing would not apply to KiwiSaver but would apply to other investments in shares.

New Zealand PIE funds are not taxed on capital gains or losses at present.

Pathfinder’s John Berry said that would create a huge tax advantage for the Government retirement savings scheme. "As I understand it the point of Labour's CGT policy is to discourage investment in housing and redirect investment into more productive areas of the economy.  However I'm not sure putting the same tax on housing and shares does much to drive investors out of housing and into shares - on a relative basis you haven't changed anything."

The CGT under Labour would apply to net gains. The only exemptions are for the family home, personal assets, collectables, small business assets and payouts from retirement savings schemes.

It will be apply to gains accrued after the tax is implemented and tax will be applied on realisation. Capital losses will be able to be carried forward and offset against future capital gains.

Share traders will continue to be taxed at a marginal or business tax rate.

Berry said the proposal created a risk that investor funds would move from liquid investments, such as PIE funds, to KiwiSaver funds, which are locked up until retirement.

“I think it would be really unhelpful if there was asymmetry between managed funds and KiwiSaver. That would encourage people, because it would be tax-advantaged effectively, to take their money out of managed funds and put it into KiwiSaver.”

He said PIE funds worked well as they were. “When you’re investing in New Zealand shares, there’s no CGT. Traders outside PIEs do pay capital gains tax. That’s a helpful structure. We invest in international shares and I don’t know what this would mean for the FDR. Would they keep the FDR and not apply a capital gains tax, or apply a capital gains tax?”