Any capital gains tax recommended by the Tax Working Group will be judged for fairness by the Taxpayers Union against five measures, including exempting inflationary gains and it being tax neutral overall.

The Tax Working Group, chaired by former Finance Minister Sir Michael Cullen, is due to publish its final report next month, having released an interim report in September.

The Taxpayers' Union, which promotes lower taxes, said it would not necessarily oppose a capital gains tax before it saw the final report.

The detail of the capital gains tax would be crucial for determining whether the union accepted the reform "or fight it with everything we've got," said executive director Jordan Williams.

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The union released a report today setting out its five measures of fairness:

• No valuation day – it favours grandfathering assets into a tax regime upon their first sale after the tax takes effect rather than the tax applying to all assets assessed at a certain value from day one.

• Exempting inflation - it says the tax should not apply to the inflationary part of the capital gain on sale, and only to the real capital gain.

• Revenue neutral - any additional revenue from a capital gains tax to fund tax cuts in other areas.

• Roll-over relief – Allowing for the deferral of capital gains tax on inherited assets until the first realised sale after the inheritance.

• Discounted rate of CGT – it favours a rate much lower rate than as suggested in the interim report, at the taxpayer's highest tax rate.

Jordan Williams said if the Government put forward a reasonable proposal focused on fairness and steady reform, the Taxpayer's Union would accept a tax shift.

"In contrast, if the Working Group process was just an excuse for aggressive tax hikes, we'll fight it to the end."

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Some of the union's measures looks set to be met, on the basis of the interim report and later comments.

Sir Michael has already ruled out having a valuation day, saying in response to such speculation by a columnist last year: "There's no proposal under consideration that would require every New Zealand business to obtain a professional valuation all on the same day.

Sir Michael said the working group was still examining design options was looking carefully at a range of options that would minimise compliance costs.

"Any suggestion that we would deliver a recommendation that would saddle New Zealand businesses with billions of dollars in compliance costs is absurd and is just blatant scaremongering."

The interim report also looked at roll-over relief and indicated it would come up with principles on some limited areas in which it might apply.

However setting a capital gains tax at a lower discounted rate seems unlikely, given that the interim report suggested the income from capital gains should be treated like income earned from a person's labour.

On the issue of tax neutrality, Finance Minister Grant Robertson asked the Tax Working Group after the interim report to recommend an overall package including measures "that could result in a revenue-neutral package."

Out of bounds for the Tax Working Group is any tax that would apply to the family home or the land under it, and any inheritance tax.