GST on food

A good tax may be an oxymoron but a simple tax is better and GST is simple.


Sharp increases in the price of groceries have resulted in calls for food to be exempt from GST and now the Herald reports a petition has been launched: 


But making exemptions to GST would create complications, making it more difficult and expensive to administer and operate; and it would mask the symptoms rather than solving the problem.


It would be extremely difficult to justify exempting luxury food from GST, but how do you draw the line between luxury and necessity? In Australia that has led to a confusing judgements: bread and lettuce are exempt from GST but a salad sandwich isn’t; a raw chicken is GST free but the same bird would incur the tax if sold cooked.


The problem of affordability of food is not GST. It is partly a result of global influences one of which is that vast areas of land which were producing food are now growing crops for bio-fuels.


It is also because we are a relatively low waged, high taxed economy. Both those problems would be better addressed by lowering income taxes rather than by tinkering with GST.

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