Steven Joyce targets the hole in Labour's tax policy

National says if Labour forms the next Government, small business owners could be taxed when they sell-up.

Finance spokesman Steven Joyce told The AM Show on Thursday it would be a "nasty shock" to people who've built a business from the ground-up.

"A capital gains tax on small businesses would be a real shock for thousands and thousands and thousands of small businesses."

Labour hasn't actually proposed a capital gains tax on the sale of small businesses - but nor has it ruled them out, instead waiting for the outcome of a tax working group it wants to set up after the election.

The only decision made on the party's tax policy since the opening of the Government's books earlier this week is to rule out increasing the top tax rate.

Finance spokesman Grant Robertson, also appearing on The AM Show, was keen to emphasise the extension to the existing two-year bright line rule, which ensures anyone who flips an investment property within two years of buying it pays tax.

Labour expects to extend that to five years.

"If you flip an investment property within five years, you'll pay tax on that. I think most New Zealanders today who are going to work and paying tax on every cent that they earn, look at somebody who flips an investment property and doesn't pay a cent of tax on the profit from that, and say 'that's not fair'."

Mr Joyce said an extension to the rule wasn't required because if flipping houses is how someone earns a living, "that's taxable".

"This is the great fallacy - if somebody is trading properties to make a profit, they owe tax... the law already is if you are buying and selling houses to make a profit, then you are paying tax on that. That's been the case for a long time."

National is promising income tax cuts if it forms the next Government, but ruling out any more until after 2020. Labour wants to boost the Government's coffers so it can tackle perceived shortfalls in housing, education and healthcare, and will borrow "about $2 billion over a four-year period" more than National plans to.

"We've got to make sure that we actually do house people, and we have to borrow a little bit more in the short-term to do that," said Mr Robertson.

"But I'm happy to stand by that commitment, because I don't want people living in cars and garages."