Newton says someone on a 33% tax rate investing in a typical portfolio of global shares will earn 2.3% less each year.

“Investors are effectively required to take higher risk to get the same return they were getting or settle for a lot lower return.”

Newton raises two other objections to the proposals which have not been previously canvassed.

One is the concession which allows investors to defer tax on returns above 5% for that year to future years.

The idea is to minimise the fluctuations in tax which could come from the up-and-down nature of global equity markets.

But is not all good news.

“It doesn’t work like that,” says Newton. “In negative years, you are still paying tax.”

This is – ironically – one of the reasons Finance Minister Michael Cullen gave for not adopting the risk free rate of return method advocated by the 2001 McLeod Tax Review and which the government considered for some time.

The other big difficulty with the changes Newton highlights is that it is at odds with the declared policy aim of the government to encourage savings.

The government’s line throughout has been that this will help small savers and only affect larger sophisticated savers who are well able to look after themselves.

It is not as straightforward as that, says Newton.

“The proposed changes will hit everyone who has savings in managed funds, and the smaller people with savings will get hit the hardest. This is something we need to get through to the Green Party and Maori Party members on that select committee.”