Tension brewing between Labour and Greens over tax

Andrew Little Metiria Turei Labour Greens
The Greens haven't backed away from their tax policy from the 2014 election (file)

To raise tax or not to raise tax - that's the question facing Labour and the Greens.

The parties, which signed a memorandum of understanding, seem to be at odds over whether tax increases are needed.

Labour leader Andrew Little has ruled them out, but Green co-leader Metiria Turei won't, saying the Greens' tax policy is still being developed.

Speaking to The Nation on Saturday morning, Mr Little said Labour is ditching its 2014 election policy of raising the top personal income tax rate to 36 cents - and said its spending promises can be paid for out of existing tax revenue.

"The Government has achieved more tax revenue than they expected," he said.

But the Greens haven't backed away from their tax policy from the 2014 election, which would have seen a new top tax rate of 40 percent above $140,000.

Ms Turei told Newshub the party is still developing its tax policy for this year's election and wouldn't take raising taxes off the table.

"We're not ruling it out," she said.  

"I don't know what the tax policy will have yet, but at the last election we did have a policy to increase the top tax rate."

"We are reviewing our tax policy for this election so we will present that information in time."

Ms Turei said the parties were developing their own policies separately and Labour's call for no new taxes wouldn't come into their decision-making.

"We are quite independent of Labour."

And while Mr Little said Labour policies had been costed out of the current tax revenue, it's unclear whether any would be set aside for any Green policies.

Ms Turei said those discussions hadn't formally taken place.

Labour and the Greens will make a major joint economic principles statement this month.