Pepanz executive officer John Pfahlert described the Government's decision as a "knee-jerk reaction".

Pfahlert said Pepanz believed the Government had singled out the oil and gas industry for special treatment, leaving other sectors untouched and still able to offset international losses.

"If the Government is genuinely concerned about the erosion of the tax base then all industries should be treated in a similar fashion," he said.

"The position in New Zealand has always been that this country taxes income from foreign branches of New Zealand companies and allows any losses to be set off against the onshore income of those companies."

Finance Minister Michael Cullen and Revenue Minister Peter Dunne announced the move on Monday evening, saying without a change to the Income Tax Act, New Zealand could miss out on significant revenue from the burgeoning petroleum mining industry.

"That means New Zealand might receive less income tax than expected on profits from oil production in New Zealand, which is particularly unacceptable when oil production revenue from New Zealand is at an all-time high and predicted to grow," they said.

In December, petroleum exports exceeded $NZ250 million (about $A213 million) for a third successive month, largely due to crude oil exports from the offshore Taranaki Tui Area oil.

The Tui partners, headed by operator Australian Worldwide Exploration, have pumped more than 8 million barrels in less than seven months of production.

"To safeguard our taxing rights on our petroleum resources, the Government will amend the Income Tax Act to ensure that expenditure on petroleum mining operations undertaken through a foreign branch cannot be offset against petroleum mining income from New Zealand," the ministers said.

The proposed changes would bring New Zealand's taxation of petroleum mining revenue into line and the oil and gas industry would be consulted before legislation was prepared, Ministers Cullen and Dunne said.

However, Pfahlert said the proposed changes were lopsided and inequitable in two respects - the Government would still tax the income of foreign branches operating in New Zealand, and that losses of foreign branches of companies not in the petroleum mining industry would continue to be deductible.

While the Government said it would be consulting the petroleum industry on the proposed changes, Pfahlert claimed that consultation would be meaningless as the Government has already announced the changes will be effective from today.

Pfahlert said he was unaware of any companies currently operating in New Zealand that had structured their affairs to avoid paying tax.