Cullen told the annual Institute of Charted Accountants annual tax conference that the issue – long a bugbear for the financial services industry, and seen as an impediment to savings – could be considered as part of the current review of tax on investments being carried out by former BT Funds Management chief executive Craig Stobo.

“From my discussions with Craig Stobo and with members of the savings industry, an imperative seems to be to remove the tax on capital gains levied on savings through actively managed unit trusts and super schemes when it is not levied on individual investors or passive funds.

“This seems both unfair and inefficient – unfair because in practice a harsher tax treatment is likely to apply to small investors and inefficient because it represents an implicit tax on the use of institutional savings.”

Stobo reports at the end of the month and Cullen told the conference that while “I do not want to pre-empt Craig Stobo’s report, but I would be very sympathetic to changes along these lines.”

The Stobo report will be released in early November, Cullen confirmed. Although that report’s content is not known yet, there is growing speculation that it will recommend the “risk free rate of return” method of taxation for offshore investments only.

This is in line with the Rob McLeod Tax Review recommendations in 2001. Stobo has been asked to consider whether the RFRM method should be used for domestic investments as well.

Although Stobo is not saying what he will recommend, some sources say he will suggest a form of resident withholding tax for onshore investments.