A senior Liberal official who distributed fake pamphlets that falsely linked Labor to terrorism is resisting calls to call off a political comeback at next month's local government elections.

Jeff Egan, a former member of the NSW Liberal executive, was photographed distributing pamphlets at the 2007 election that portrayed Labor as forgiving of terrorism in an ultimately unsuccessful dirty tricks campaign to retain the federal seat of Lindsay.

The PR businessman, who was forced out of the Liberals as the flyer fiasco overtook the Howard government's final re-election campaign, is making a comeback next month. He will stand for the Liberal party for Blue Mountains council.

Labor leader Luke Foley called for Mr Egan to be removed from the party's ticket.