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The Government has attacked Labour's proposed capital gains tax, saying it would be bad news for landlords, businesses and people with second homes.

The party's tax policy will be released next week, with a tax on investment properties intended to raise billions of dollars.

The tax would not affect family homes and would be aimed at people with one or more investment properties at a rate of 15 per cent on the profit made when they are sold.

Labour is reportedly seeking to raise $4.5 billion a year to fund cuts to GST on some foods and tax-free allowance on earnings.

But with the party refusing to speak until the policy is formally announced, National yesterday went into overdrive, saying any such tax would be bad news for New Zealand.

Prime Minister John Key said a tax of 15 per cent would not generate anything near $4.5 billion a year. Labour would have to impose the tax at 30 per cent on rental properties, baches, farms and commercial properties to do that, he said.

"It would have to be every sort of property other than the family home and I think that's a huge step backwards for New Zealanders."

Census 2006 data suggested about 200,000 people owned an investment property and there are about 400,000 rental properties in the country.

"It would probably take 15 years before it raised $700 million," said Finance Minister Bill English.

"The other big problem for a capital gains tax is that house prices are flat or falling so it is quite possible that one could bring in the tax and raise nothing."

It was left to Greens co-leader Russel Norman to argue for the levy yesterday in Parliament.

The Greens have long favoured a capital gains tax on all property but the family home.

Dr Norman pointed out the Savings Working Group found up to 50 per cent of the increases in house prices during the decade-long property boom were due to favourable tax treatment of property investment.

Dr Norman challenged National's assertion the tax was too complicated "when they can manage it in the US, China, Denmark, Finland, France, Germany, Poland, Singapore, Sweden, Switzerland, the UK, Japan and even the Australians can do it".

What Mr Goff did say was that Mr Key knew the economy was in trouble but had no plan to fix it.

"Selling assets won't do it and the Government's financial statement today showing that debt went up by another $3 billion over forecasts shows that we need some bold change.

"We have to pay down the debt, we have to invest in the future by investing in research and development and upskilling.

"We need a fairer tax system so that everyone pays their fair share and that the load on lower- and middle-income people can be lightened, such as by making their first $5000 tax-free."

Auckland Property Investors Association president David Whitburn said any increases in costs for investors would inevitably be passed on to tenants.

He also feared the tax would prompt investors to quit the market, reducing the supply of rental properties and pushing rents up further.