Main parties pushing tax policies as vote-winners

Tax is emerging as the battleground heading into the last two weeks before the election with National seizing on Labour leader David Cunliffe's stumble over the details of his flagship capital gains tax policy.

While National will next week set its tax cut plans against Labour's capital gains tax, Labour claims its plan to post bigger surpluses gives it more room for tax cuts if it wins this election and a second term.

Mr Cunliffe was unable to parry Prime Minister John Key's claim that the capital gains tax would apply to family homes held in trusts during Tuesday night's debate.

While Labour was quickly able to prove its policy always included an exemption for family homes in trust, Mr Cunliffe's inability to respond on a crucial detail gave National an opportunity to attack the plan.

"Labour's been working on this policy for five years and David Cunliffe was the finance spokesman when it was developed so it's a bit worrying for his supporters and everyone who's expected to pay for it that he just doesn't know how the policy works," Mr Key said yesterday.

Economic Development Minister Steven Joyce said while Labour had clarified the trust issue yesterday, Mr Cunliffe's stumble "has been helpful because we've got into it and discovered that this is a very complex tax proposal which a lot of people would have a lot of difficulty working out where they sit, and plenty of people would have the opportunity to avoid it".

Mr Joyce said National's campaign advertising will shortly begin promoting its tax policy, including plans for tax cuts, over what Prime Minster John Key says are the Labour-Greens bloc's five new taxes.

But Mr Cunliffe said Labour could win that debate.

"New Zealanders know that we're being fiscally responsible, we'll run surpluses and pay down national debt and that with Labour leading the government they'll have what they expect from a strong public education system, a great health system and a civil society where everybody gets to be the best they can be."

Labour finance spokesman David Parker said Labour's plan to run larger surpluses meant "in the second term the prospect of income tax cuts as capital gains tax revenue rises become more real under us than it is under National". He has previously said tax cuts are "likely" in a second term but "they wouldn't be weighted towards the wealthy".

Defending the capital gains tax, Mr Parker said it would increase fairness.

"At the moment middle income New Zealanders pay higher rates of tax on overall income than wealthier New Zealanders when you factor in capital gain income and GST."

- By Adam Bennett of the New Zealand Herald