It would be tempting to enjoy watching Labour explain the logic of taking 15% off the price of pomegranates while leaving it on frozen peas.
It could be fun listening to the party try to explain how a 15% reduction in the price of out-of-season asparagus will help the poor without giving a bigger benefit to the rich.
It might be amusing it to see them attempt to justify removing GST from pineapple and pawpaw but not from milk or meat, bread or fish.
And I could laugh laugh when people start asking what’s the benefit of a policy which increases compliance costs, sabotages the simplicity of our GST system and does nothing at all to address the real problems facing individuals and the economy.
Except this is serious. Reducing GST on fresh fruit of vegetables is a shameless con and shows labour has no grand economic plan.
Good tax is an oxymoron but simple taxes are better and our GST has been simple from the start. Phil Goff knows this because he was one of those who helped the 1984-87 Labour government develop it and sell it.
The arguments for keeping it simple which made sense then still make sense today.
It’s not just that tinkering by making minor exemptions increases costs which are not matched by significant savings. It’s that as Kiwiblog points out, it’s the start of a slippery slope.
If GST comes off raw peas, why not frozen peas which may be more nutirious? If it comes off some food, why not health and education goods and services? Once you start, where do you stop?
This is a high cost low value excuse for policy which, as Bill English explains, won’t help anyone much and help the poor least:
Labour’s unfunded policy to remove GST from fresh fruit and vegetables would deliver only $1 a week for the average Kiwi – and much less for low income earners, Finance Minister Bill English says.
The estimated $250 million cost of the new policy would have to be paid for by extra borrowing, pushing up already fast-rising public debt.
“However it’s good to see Labour confirming they would leave GST at 15 per cent on all other goods and services – they now realise that the vast majority of Kiwis will be better off from the Government’s income tax-GST switch,” Mr English says.
“But their politically desperate move to remove GST from fresh fruit and vegetables would needlessly complicate the tax system, increase compliance costs and create all sorts of perverse anomalies.
The $250 million annual cost of the move, divided among all New Zealanders, is worth, on average, just over $1 a week – less for low income earners and more for high income earners.
“This puts the Government’s tax switch, which will leave the average income earner $15 a week better off, into perspective,” Mr English says. “It’s also worth noting that fruit and vegetable prices have actually fallen by 11 per cent since National took office, having jumped 54 per cent under Labour.”
The Tax Working Group last year concluded that removing GST from food would make almost no difference to the distribution of tax across income levels, but would lose 20 per cent of GST revenue. This would have to be made up by increasing other taxes.
“Labour’s policy makes no sense and smacks of political desperation,” Mr English says. “Phil Goff must explain to New Zealanders why he is removing GST from imported, out-of-season raspberries and asparagus, but not from New Zealand frozen peas, which are a nutritious part of many Kiwi meals.
“People would be able to buy GST-free potatoes, take them home and make deep-fried chips. But at the same time, healthy foods like Weetbix, low-fat milk and wholegrain bread would be subject to GST.
“Setting those boundaries will introduce considerable administrative and compliance costs for Government and retailers, legal uncertainty, and opportunities to game the system.
“The experience from other countries with these sorts of policies is of protracted legal disputes and hundreds of pages of rules to determine where exactly the boundaries lie.
“Labour needs to answer these kinds of questions – and explain how it would pay for this muddled policy,” Mr English says.
The party might also want to explain how complicating the tax system will lead to the economic growth which is what will benefit all New Zealanders most.