He has approached government ministers in an effort to get the proposals more tightly defined, so they will catch the 'other kinds of fish' they are intended to trap, he said.

The proposed regime taxes capital gains by investors in overseas companies. However, Blackham said, 'there is a huge difference between investing in secure companies like Exxon Mobil Corp. or IBM Corp. and investing in a high-technology startup."

With the latter 'you have perhaps a 10 percent chance of making a real gain' and to have such high-risk investment taxed would create a massive disincentive. This, he said, would lead to a flight of investment into safe local vehicles like property.

Many thoroughly Kiwi startups are likely to be classed as 'overseas companies', having attracted investment from U.S. venture capitalists, who are likely to insist that the company is listed in the US, Blackham said.

'Kiwis will then be expected to pay tax on the unrealized capital gain. They could pay a lot of money in tax and still have the company go belly-up in the end.'