Rich people benefit from not having to pay a capital gains tax, Green co-leader Russel Norman says.

Labour tax policy isn't being released until next week but NZPA has confirmed that a capital gains tax on investment properties is its centrepiece, intended to raise billions of dollars.

The tax won't affect family homes but Labour is understood to intend imposing it on all other investment properties, including those owned by companies, rural properties and farms.

Dr Norman said Treasury and Inland Revenue research showed people on very high incomes gained disproportionately from not facing a capital gains tax.

In Australia those earning $1 million or more derived 30 per cent of their income from capital gains while those on average incomes got negligible income from them.

"Treasury and Inland Revenue therefore conclude that a tax on capital gains (excluding the family home) in New Zealand would fall mostly on those on very high incomes, thereby increasing the progressivity of the tax system.

"It's Treasury's way of saying that a capital gains tax is incredibly fair."

Dr Norman said the research highlighted those on lower incomes earned money from wages which were fully taxed while the largest proportion of capital gains was earned by those at the upper end of the income spectrum and this income was untaxed.

"This tax loop-hole for those that can afford to own multiple properties needs to be closed.

"By defending the status quo, John Key is arguing those earning more than $1 million a year shouldn't have to pay tax on 40 per cent of their income while those on the average wage should pay tax on all their income."

Finance Minister Bill English said yesterday the tax would raise about $700 million -- and even that was doubtful because the tax would be paid only when a property was sold and would depend on the price going up.

Prime Minister John Key said it would be "hideously complex" to administer and people would find ways around it.

"They will go through all sorts of hoops not to sell, they'll take out debt against it, they'll transfer the property, they'll do all sorts of things but not sell it," he said.

People would "spend their lives with their tax accountants" avoiding the tax, he said.

A group of university law academics yesterday disagreed with Mr Key on the tax being impractical, and said it would prevent capital going into an unproductive part of the economy.

Professor Chris Ohms, Dr Ranjana Gupta, Dennis Moodley and Katherine Ritchie said that from an economic point of view the tax was "absolutely necessary...introducing this policy would force the serious investors to put their money into markets that will stimulate economic growth".

- NZPA