Do not remove GST on Food

April 28th, 2008 at 9:30 am by David Farrar

There could be few greater acts of economic vandalism than removing on food. It is the wrong answer to the problem of increasing .

It is no surprise, as the Herald reports, that people outside supermarkets will sign a petition calling for GST to be removed from food. And if you stood outside medical centres with a petition for no GST on doctor’s fees, people would sign that also.

So why should one not remove GST on food. Here’s a few:

  1. It would impose significant compliance costs on retailers. Instead of just dividing their sales by nine, they would have to be able to track every single item sold, and whether or not that is food. If you go to the corner dairy and buy a pie and a newspaper then the pie has no GST on it and the newspaper does. So the poor corner diary would be forced out of business as they can’t afford a supermarket type electronic scanning system where every item sold is tracked.
  2. It would start a trend of removing GST on more and more items, and the future political scene will be a series of debates about what GST should be one. If one removes GST on food, then some would argue GST should be removed on gym memberships as a public health initiative. Then GST should be removed books as a literacy initiative. Seriously – there would be almost no end.
  3. As Dr Cullen says this is a one-off change that can never be repeated, and any benefits from it could well be swallowed up by further changes in international food prices.
  4. It would mean direct taxes would be $2.4 billion higher than they need to be, to compensate for the GST loss.
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31 Responses to “Do not remove GST on Food”

  1. Pascal (2,015 comments) says:

    Better to push for higher GST and consumption taxes with a big cut in income taxes.

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  2. virtualmark (1,528 comments) says:

    I’m just waiting for Peter Dunne to decide which side of the fence he sits on here … as Minister of Revenue he’ll obviously want to preserve the integrity of the tax system, but as “Mr Common Sense” he might feel tempted to line up with the “common man”.

    Life must be uncomfortable for Peter trying to shuffle the fence palings from one butt cheek to the other …

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  3. Zippy Gonzales (485 comments) says:

    Fully agree, DPF. You’d have the situation in Oz where tampons are GST exempt but condoms aren’t. As the old man observed of the VAT structure over in the UK, the only people who benefit from exemptions are lawyers and accountants. Pascal, the next highest feasible rate for GST is 20 percent. Due to the regressive nature of flat tax, it would require a Herculean income adjustment for lower income earners to compensate.

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  4. dime (9,788 comments) says:

    yea no point. just give general tax cuts.

    watched the fuhrer on tv1 this morning. it concerns me that paul henry uses terms like “tax relief for families” etc.. how bout some tax relief for Dime???????????

    helen saying tax cuts will lead to interest rate increases.. will they really? or will $80 a week extra go to paying for petrol and food?? maybe even *shock horror* stimulate the economy?

    i was getting excited when i heard helen say tax relief about 5 times.. but then i heard her refer to the family benefit as “tax relief for families”.. :( :( :( i think we can guess whats coming.

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  5. Pascal (2,015 comments) says:

    Zippy Gonzales: Due to the regressive nature of flat tax, it would require a Herculean income adjustment for lower income earners to compensate.

    Then we should make it happen. People should not be taxed into unproductivity. Tax them when they spend their money, not when they earn it.

    Out of curiosity – why 20%? Why not 15% or 17.5%?

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  6. Redbaiter (13,197 comments) says:

    “Do not remove GST on Food”

    See- there is black and white.

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  7. Zippy Gonzales (485 comments) says:

    Pascal, one of the strengths of NZ’s GST is its simplicity. Originally GST was ten percent and easily divisible to calculate before and after GST prices. 12.5 percent is an eighth. 20 percent is a fifth. 17.5 percent does not readily compute.

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  8. Redbaiter (13,197 comments) says:

    Look, all this is so much waffle, and its a direct result of a completely fucked up and unworkable taxation regime, one that has become so perverted at the hands of power seeking politicians it is in effect a danger to and a direct attack upon the democratic process. Pull it down and charge every person over 16 (arbitrary figure) a flat figure per year. Not a percentage of income, but like rates without the valuation component, a fixed and computed amount.

    Anyone too poor to pay can apply and be granted an exemption, with the proviso that they pay it back in better years, and if no better years eventuate the debt can be wiped upon application. (thats just to deflect criticism from the left, those who profess to care about “the poor” but in reality only want power)

    One flat fee for every person. There is no good logical reason why one person should pay more than another, or any one person should pay the tax of another or that any person has a government legislated right to the income of another. One flat fee is the only solution.

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  9. dime (9,788 comments) says:

    Zippy Gonzales – i calculate GST everyday on products i import.. when setting prices.. checking GP etc.. i gotta be honest, i have never once thought of GST as being 1/8..

    i think 15% would work..

    knowing this govt thought.. they would increase GST to 15% and then give tax relief via family welfare

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  10. Pascal (2,015 comments) says:

    dime: i calculate GST everyday on products i import.. when setting prices.. checking GP etc.. i gotta be honest, i have never once thought of GST as being 1/8.

    I simply update my Cashbook (Software) and when the time for a GST return comes, I click one button and it fills it all in for me. I then simply go online, file my return and pay it via Internet banking. I’ve also never worried about 1/8th or whatever percentages – there are tools to manage that for me.

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  11. BlairM (2,314 comments) says:

    Why stop there Redbaiter? You are assuming people need to be taxed at all!

    The government should consist of one Minister of the Crown who runs the Justice Department, which would be self-funded. Parliament would meet once a year to appoint Judges and review basic criminal and civil law.

    Tax should only be collected for the specific purpose of repaying debt incurred by defending the nation in a time of war.

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  12. Redbaiter (13,197 comments) says:

    “Tax should only be collected for the specific purpose of repaying debt incurred by defending the nation in a time of war.”

    Yeah, great idea. Soon as the war starts, we rush out and buy arms in a captive and stressed market, and then we train up an army from a bunch of simpering self indulgent panty waisted pussies, and then- holy shit, its too late. We lost..!

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  13. ErrolC (18 comments) says:

    I wish the news reports would give estimates of the extra compliance costs in $$. It’s what’s missing from the NZH extract below.
    Removing GST from all food in New Zealand would cost the Government about $2.4 billion a year.
    Taking it only off fruit and vegetables would cost about $300 million a year.

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  14. andymoore (74 comments) says:

    correct me if I’m wrong, but if there’s no GST on food, then the Dairy owner never paid any GST when he bought food to put on his shelves. That is, surely the supplier wouldn’t be adding GST to his products.

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  15. PaulL (6,013 comments) says:

    Andymoore – both. The supplier needs to not charge GST, the Dairy owner needs to also not charge GST. In Australia, if the dairy owner buys a fresh chicken the supplier doesn’t charge GST, if the Dairy owner cooks it they now need to charge GST on it. The whole process is incredibly ugly – rather not go there.

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  16. pdm (842 comments) says:

    Pascal has it right – `tax people when they spend their money not when they earn it’.

    Something along the following lines seems logical to me:

    1. No tax on first $15,000 or perhaps even $20,000 income.
    2. Flat tax at 15c or perhaps 20c in Dollar thereafter.
    3. GST 15%.

    Once bedded in productivity would take off and I suspect tax take would remain much the same.

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  17. dave (987 comments) says:

    I’d rather have GST on food and be able to shop on specials and have discounts on petrol. If they removed GST and scrapped specials there’s no way we`d be able to feed our family of four on $160.00 a week.

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  18. BlairM (2,314 comments) says:

    “Soon as the war starts, we rush out and buy arms in a captive and stressed market, and then we train up an army from a bunch of simpering self indulgent panty waisted pussies”

    Who said anything about buying arms and training? Militias are perfectly legal in a free society.

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  19. Grant (434 comments) says:

    Hear hear PDM.
    Now tell us why that wont work lefties……..
    G

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  20. Redbaiter (13,197 comments) says:

    “Who said anything about buying arms and training? Militias are perfectly legal in a free society.”

    So there’s no taxpayer funded armed forces? Great. How many militias do you know that can run one of these?

    http://www.spectrumwd.com/c130/images/ac130_05.jpg

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  21. Redbaiter (13,197 comments) says:

    “Who said anything about buying arms and training? Militias are perfectly legal in a free society.”

    Oh yeah. Militias- great defence against gunships, aircraft carriers, nuclear submarines and supersonic computerized fighter jets. The Chicoms in NZ will vote for you.

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  22. GPT1 (2,116 comments) says:

    Could not agree more. A cut to income tax is a far better tool for alleviating the pressure on the wallet.

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  23. BlairM (2,314 comments) says:

    Absolutely Redbaiter, heard of a little place called Iraq? How about Vietnam?

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  24. RRM (9,767 comments) says:

    BOYS BOYS BOYS!!!

    If a military machine the size of Chinas decides to start invading countries like ours, I doubt the finer points of our tax structure will make any difference to their success or otherwise. But in a World War Three scenario like you are talking about you would be lucky to be eating food regularly at all!

    But getting back to the GST and the food; certainly you’d think a higher GST (in conjunction with income tax cuts so we can afford to pay all that extra GST) would motivate the consumers with less ready cash (who need to worry about this) to focus on buying the basics, and that in turn might motivate more production and keener pricing on basic Colby cheese and Lion Red, and less of the lavish acreages of 5 year old Camembert and 2006 Pinot Gris that you see in the supermarkets…

    Perhaps there’s a tax policy for Our Hero Mr John Key the Unspeaking in there somewhere…?

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  25. freethinker (688 comments) says:

    I agree to leaving the Gst system as simple as possible which means leaving Gst on food but if compliance costs negate this as some suggest then how come other countries like Aus/UK manage with multiple rates. Are they more efficient than us? But talking of compliance costs, how much does WFF cost to administer against a tax cut which costs nowt administratly!! Taking Gst off the excise duty on fuel etc is a better solution as taxing a tax as Paul Henry commented this morning is morally wrong, shame he didn’t comment when Her Ugliness refused an answer – I take that is a NO then – that would have Helens scowl grow really ugly, she might even call him naughty names!!

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  26. ErrolC (18 comments) says:

    Freethinker, other countries ‘manage’ by using fancier software, AND spending more time getting things right. So it costs more, most of the cost being spread out across businesses (paying admin staff, accountants, lawyers, auditors, software houses, etc).
    It would be much easier to drop the pump price of fuel by reducing or removing some of the ‘special’ taxes and levies on it, rather than adding a new GST rate – you would have to make the GST the customer pays 10.435% (or whatever it works out as), not 12.5.
    I’d rather we had easy admin and a lower GST rate than more admin and a higher rate (in order to collect the same $$).

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  27. pdm (842 comments) says:

    Freethinker.

    Leave the GST ON petrol and reduce or get rid of the excise duty – so much simpler and more beneficial.

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  28. Redbaiter (13,197 comments) says:

    “Absolutely Redbaiter, heard of a little place called Iraq? How about Vietnam?”

    Wars prolonged and or won by politically correct bullshit and the efforts of fifth columnists in the US? Anyway, how about ‘deterrent’, or ‘pre-emptive’???

    Singapore has an effective defence force, and given that this is a paramount duty of government, then the fee I propose above should have the development and maintenance of a Army Navy and Airforce as one of its financial objectives. Along with a Justice system as you suggest, and a bit of record keeping (land ownership and transfers, births deaths marriages etc) and that’s about it. Even the perception that productive citizens should be providing a lifestyle for bludgers like Philu, and that he could use his vote to obtain for himself that funding, would be light years away.

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  29. gd (2,286 comments) says:

    In the interview on Zb Ckark talks about how much bigger WFF has become as the excuse for not removing GST .

    Of course she is correct and this is the agenda To make as many Kiwis dependent on the STATE for part or all of their income.

    To those Socialists who try and deny this why not cut out the middle man and leave more money in the workers pocket to begin with.

    And the Answer is That means they dont see themselves as reliant on the STATE and are less likely to feel afraid to vote against the Gumint

    Its all about the COMMAND AND CONTROL mentality. The moden equivalent of the medievil Baron with the power of life and death over the peasants.

    That how Clark see the citizens including her own dumbarse supporters bowing and scrapping to her.

    Pathetic morons all of them.

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  30. dave (987 comments) says:

    A cut to income tax is a far better tool for alleviating the pressure on the wallet.
    Not as good as moving back home to live with your parents or moving to Australia. Or unless you dont work and have to take advantage of the WINZ system, or are are a student, or are a stay at home parent with a partner on $120k in which income splitting for tax purposes will be more beneficial. Or are on the average income and have a kid in which case you`ll get around $50.00 a week more. Winning lotto would be a good tool, too.

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  31. mara (759 comments) says:

    “While all you wankers chatter on about the ‘Grand Solution’, working-class , WORKING families on minimum wage are really hurting. I had a sparkie in today; lovely guy, family man, 3 kids, wife at home looking after the youngsters. He now has to work so many hours weekly to make ends meet, that his kids hardly recognise him when he staggers home. Thanks Labour.

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