Finance Minister Michael Cullen, under pressure from coalition partners to drop headline tax rates, says other specific tax reductions are under way.

In a radio interview, Cullen said “support for savings in a range of areas will be a major feature of next year's Budget.”

And in a list of tax reductions promised for next year’s Budget reeled off in a radio interview, Cullen said “Yes there will be tax cuts, as I've said, there'll be tax cuts around depreciation, FBT, what's called financial intermediaries, that is taxation on, on earnings in funds…”

And elsewhere in the same interview, Cullen talked of tax reductions “in terms of the taxation on earnings in certain funds where some of the capital gains tax, capital gains are taxed at the moment in other cases aren't…”

Three weeks ago Cullen told the Institute of Chartered Accountants that the capital gains tax on active managed funds is “unfair and inefficient” and that he would be “very sympathetic” to its abolition.

The issue has long been a sore point with the funds management industry, and those who believe New Zealanders should be encouraged to invest in such funds rather than in property - which, like passive funds, has no capital gains tax.

However yesterday was the first clear indication from Cullen of a definite move in next year’s Budget.

The issue will be included in the broader review of the taxation of collective investments by Craig Stobo, which is planned for release on Tuesday.

That review is expected to recommend the ‘risk free rate of return’ method, recommended in the 2001 McLeod Tax Review, for overseas investments, and a form of resident witholding tax for investments within New Zealand.