Foreign banks face tougher tax regime

The Government has moved to require foreign-owned banks to hold capital of at least 4 per cent of local assets to qualify for tax deductions on interest.

Revenue Minister Michael Cullen said the tax-law change was intended to ensure the banks could not shelter locally derived income by using interest deductions on excessive debt..

The Government had factored payment of an additional $360 million a year in tax from banks into budget planning.