John Key using 'gotcha' politics - Cunliffe

21:54, Sep 03 2014
David Cunliffe at the leaders' debate in Christchurch.
IN ACTION: David Cunliffe at the leaders' debate in Christchurch.

Labour leader David Cunliffe is defending his failure to recall details of Labour's capital gains tax in last night's Press leaders debate, accusing Prime Minister John Key of "gotcha politics".

Cunliffe stumbled during the debate when Key claimed 300,000 Kiwis with their homes in family trusts would have to pay a capital gains tax under Labour's tax policy.

The Labour leader did not correct him even though under the policy the claim was wrong.

Cunliffe in Christchurch today accused Key of "gotcha" politics, but admitted he had not known enough to correct the prime minister.

"I was surprised he was attempting to mislead New Zealanders and I thought, rather than contradict him on the spot, I would check the facts," Cunliffe said. "I did - he got it wrong. Our capital gains tax will not apply to family homes whether they are in a trust or owned directly."

Asked why he had not corrected Key immediately, Cunliffe said he had wanted to be sure of his facts - even though he wrote the policy himself.

National has honed in on Labour's tax plans as an electoral liability

Key last night repeatedly accused Cunliffe of lumping "five new taxes" on New Zealanders.

Cunliffe today did not dispute that, though could name only four new taxes - the top marginal rate and the trustee rate will rise, the capital gains tax and closing tax-avoidance loopholes.

When asked why he had listed only four, Cunliffe said there was more than one loophole.

Cunliffe also confirmed that under Labour's policy children would have to pay a capital gains tax if they sold the family home after both parents had died.

But he denied that was an inheritance tax, saying it would be paid only if the estate was sold - and there would be no capital gains tax payable if the children decided to take over the home.

"Death does not crystallise CGT; it can pass to the next generation if the home is not sold," he said.

"CGT is not paid on death ... if it is sold, and the cash is realised then on the basis of any future gain from the original valuation date net of costs CGT applies to the balance."

Key said in Southland today he knew more about Labour's policy than Cunliffe did.

"They don't know how it works, or you could drive a bus through it," Key said.

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

Key said he understood that family homes in trusts were covered by capital gains tax in several jurisdictions .

"So today they're now telling us, 'Oh well, maybe holiday homes are exempt and maybe this other thing is exempt'. Any tax lawyer will tell you that thing is a mess," Key said.

"It will have to be surrounded by regulations from hell and even the leader of the party, David Cunliffe, couldn't answer the simple question, is your family home in or out, he couldn't give us an answer."

Key said the IMF might advise the creation of a comprehensive CGT, but there were questions as to whether one was needed when the Crown books were in surplus.