Labour leader Phil Goff is refusing to comment on the one of the worst kept political secrets - Labour's plans to introduce a capital gains tax.

That the party will introduce a 15 per cent tax has been widely reported in the media, but Goff refused to comment on details of their plan today.

"I'm making the announcement in full next Thursday, until then I'm not commenting on any particular alternatives we might be looking at."

The principles behind Labour's tax programme were fairness and paying off government debt, he said.

Meanwhile, Prime Minister John Key said a capital gains tax on rental properties would raise $700m over 15 years and would need to apply a higher tax rate to most properties to make more money.

"I think it's a huge step back for New Zealanders if they were to apply that sort of tax."

Key said it was clear people should vote for Labour if they wanted to pay more tax.

"It's just reality, they're going to charge people more."

It is understood Labour considered many options, including a land tax, before settling on capital gains.

In 2009, the Tax Working Group estimated a broad-based capital gains tax could raise up to $9 billion a year. Excluding the family home would cut that to $4.5b a year.



Its estimates were based on property price inflation of 2 per cent a year. Lower revenue could be expected if the tax was levied when profits were realised after the property was sold.



Key has repeatedly ruled out introducing a capital gains tax saying it would not make much money up front because you have to wait for people to sell assets and they were likely to hold them for longer once the tax was brought in.



It was also "hideously complicated" and people worked hard to avoid paying it, he said.



A capital gains tax may make rental properties less attractive investments and bring down prices.



Treasury advice on such a tax was that it should be "grandfathered" and only apply to assets purchased after its instigation.



The Green Party has always campaigned for a capital gains tax. Leader Russel Norman said it would have been better if it was introduced earlier but it was progress to have it introduced now.



Property investors have already hit back at the plans before the details have been officially released, with some saying it could put people off buying rental properties.



Andrew King, of the Property Investment Federation, told Radio New Zealand it would be unfair.

"If you sell a company you don't pay capital gains tax on that, if sell shares you don't pay a capital gains tax on that, if you sell art work you don't pay a capital gains tax on that, why should property be any different?"



A similar tax, called property speculation tax, was introduced by Labour in 1973. It was repealed in 1979.



Labour was also expected to announce a new income tax rate for those earning over $120,000 a year and has previous announced it would introduce a tax-free band on the first $5000 of income, costing about $1.3b, and remove GST from fresh fruit and vegetables.