GST on “healthy food”

July 14th, 2010 at 9:00 am by David Farrar

The Herald reports:

Political momentum for removing from healthy food is increasing with both the Maori and parties working on the idea.

But even in the event the two parties were to put aside their differences and work together on the policy they would not have the numbers to pass the required legislation since the National Party and United Future are opposed to it.

MP Rahui Katene’s Goods and Services Tax (Exemption of Healthy Food) Amendment Bill is likely to get its first reading when Parliament returns from recess next Tuesday.

The member’s bill would remove GST from fruit and vegetables, bread and cereals, some dairy products, lean meat, poultry, seafood, eggs, nuts, seeds and legumes.

Yesterday, Labour Party leader Phil Goff – who has previously opposed similar proposals – said his party was close to adopting what he believed was a more workable policy to remove GST from fresh fruit and vegetables.

Revenue Minister Peter Dunne said Ms Katene’s proposal wasn’t viable because of problems around defining what constituted healthy food. Furthermore, removing GST from the food specified in the bill would mean the loss of about $330 million a year in tax revenue which would have to be found somewhere else.

I can’t believe how desperate Labour are getting with its support for such nonsense. The only winners from removing GST on so called healthy food will be the tax lawyers.

The moment you start picking and choosing what goods are included, you get massive distortions and gaming of the system -and huge complexity.

Also any removal of GST may be insignificant compared to normal price movements. By coincidence the Herald reports today:

Food prices dropped by 2 per cent in the past year – the largest annual fall since records began more than 50 years ago.

The Food Price Index, released yesterday, shows that fruit and vegetables are nearly 10 per cent cheaper than they were a year ago.

So fruit and veges are 10% cheaper without fiddling with GST, which would cause the Government to borrow a further $330 million a year.

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86 Responses to “GST on “healthy food””

  1. Scott (1,800 comments) says:

    Quite right DPF. Labour are just ridiculous at the moment. Does Phil Goff have a clue?

    But look a party that doles out millions of dollars in free student loans to win an election is capable of anything. Trying to find another populist measure, like taking the GST off healthy foods, thereby stuffing up the tax system, is a no-brainer if they think there are votes in it.

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  2. petal (706 comments) says:

    Labour are looking for a wedge to drive in. Any wedge.

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  3. Adolf Fiinkensein (2,903 comments) says:

    The silly fools don’t realise there is no such thing as ‘unhealthy’ food. Just unhealthy eating.

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  4. Pascal (1,969 comments) says:

    I would be interested in seeing what the potential benefits are from such a change. If there are any. Do you know if they have done any analysis or is this just political grandstanding?

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  5. Brian Smaller (4,023 comments) says:

    Bread is healthy, lettuce is healthy, steak is healthy, gherkins are healthy which means a Big Mac is healthy. This idea is stupid.

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  6. Tauhei Notts (1,714 comments) says:

    This would be an unnecessary subsidy for the rich, for they are the ones that buy healthy food.

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  7. Pete George (23,567 comments) says:

    Does MP, and Labour (maybe) equate to High Support?

    The Herald ran an online poll on this yesterday which favoured taking GST off “healthy” foods at 60%.

    They also ran a “Your View” on it inviting comments which started off supporting the GST change, but ended up being a mix of views. Interestingly the “Like” thumbs up counter was favouring the “no change” comments. My guess on this is that those voting on spur of the moment assessment think healthy foods should be encouraged by dropping GST, but more of those who read the reasoning behind the idea realise it is stupid.

    Curious – I posted a short comment there last night, I just said it “was nuts, and that issn’t referring to a healthy food” and they must have rejected that as inappropriate comment.

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  8. slightlyrighty (2,475 comments) says:

    This is grandstanding of the highest order from Labour. You would think if it was feasible, which it ain’t, they would have done it while in government?

    Perhaps they should ask Horomia if he would choose healthy food if it was less expensive?

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  9. Manolo (13,780 comments) says:

    Another sign of how deluded the Maori Party is. Instead of attacking the dramatic problems bedeviling its ilk, such as the high incidence of crime and violence acts among them, the growing dependency on the welfare state, the child abuse; the racist party leadership chooses to chase this, by comparison, trivial matter.

    Surely, Turia and Sharples, bowled over by the baubles of power, have lost their moral compass.

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  10. nigel201065 (38 comments) says:

    Brian,
    your completely wrong
    Maccas is a BIG American Corporation so it is evil and eats little children
    just remember American bad, everything else good
    so a
    plate full of Taro cooked in coconut cream good
    a plate of Butter chicken good
    a plate of fish and chips good
    a Hamburger from the local shop good
    Maccas Bad

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  11. david (2,557 comments) says:

    Funny all the media are talking about “growing support” and “building momentum” on this one.

    As far as I can see it is only the media that are hyperventilating over it and are trying desperately to create the news.

    Do they have a strategy meeting of both TV channels, APN, Fairfax, RNZ and some of the other radio people to work out “this weeks beatup”? or are they all just regurgitating some idiot Maori Party Press Release.

    I used to think it was only at University where information went from the notes of the lecturer to the notes of the student without passing through the minds of either.

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  12. Pete George (23,567 comments) says:

    Correction, I posted a comment on the Herald topic last night about 8pm and it appears this morning with a time of 9:15am. That’s also nuts.

    Manolo, obesity isn’t a trivial problem for Maori (and others), this is just a bad way to address it.

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  13. Eddie (288 comments) says:

    Glad to see Labour making the most of the political news vacuum with Key out of the country for a couple of weeks – someone in the strategy unit must have been sneakily reading Fast Food Nation instead of snoozing in the house.

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  14. Archer (208 comments) says:

    If I was to follow a low-carb style eating plan to lose weight and stay healthy, does that mean food low in carbohydrate (but high in saturated fat) will be gst-exempt too? Or will the company that processes the bacon I buy have to take the matter to Court?

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  15. Eddie (288 comments) says:

    And the answer to that question Archer will cost you in 6 minute increments + GST.

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  16. Pete George (23,567 comments) says:

    People eat too much food, including too much “healthy” food.

    If 50% GST was put on all food then it might help the obesity problem more than removing it off some food.

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  17. Johnboy (16,597 comments) says:

    And if they took all the tax off tobacco you could smoke more to reduce the craving for food. I like your thinking PG.

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  18. RRM (9,924 comments) says:

    The amount of crap I eat, I should weigh 150kg and be morbidly obese too. And yet I don’t.
    I’m not against the idea of government intervention in health problems, but this won’t work.

    And Tauhei Notts comment @ 9:25am = the truth. I see a lot more fat poor people at the shops than fat rich people, and the poor people aren’t buying the flash low-calorie margarine that’s twice the price of the ordinary stuff.

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  19. YesWeDid (1,048 comments) says:

    Wow there is so much misinformation and selective quotes in this post where do I start?

    Fresh fruit and vegetables are easy to define. They are unprocessed, they look like they did when they were picked/removed from the ground. The Maori party definition would be hard to administer the Labour party one would be easy.

    Britain and Australia already have VAT/GST exemptions for some food types. There rules are not perfect but clearly having different tax levels for different food products is not an impossible task.

    And as for this costing $330 million per year, what about the long term savings in our health system?

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  20. trout (939 comments) says:

    The proposal of course ignores the fact that retail commodities are generally priced up to what the consumer is prepared to pay. A greengrocer does not observe set margins, he prices product according to demand, freshness and availability. Remove GST and the sale price will remain the same. The Greens of course would appoint price police.
    The absurdity of differential GST (only the Irish would have 7 categories) is illustrated in the UK: buy a cold pie (no VAT); give it back for them to heat up and then take it away thus avoiding VAT on takeaways.

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  21. Grizz (605 comments) says:

    I will support this bill if GST is increased on unhealthy food, including fish and chips and most takeaways.

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  22. kevin_mcm (152 comments) says:

    Couple of points here.

    1. I am against this change – the beauty of our system is that it is broad based and simple. However
    2. Removing GST on fruit & vegetables would not be difficult – every accounting system will support this change, and we already have goods and services that are exempt from GST. The only complexity is in defining what is exempt, but the narrower the exemption the easier.
    3. Not sure how you get $330M of lost GST revenue from drops in prices over the last year. You would need fruit and vege total sales to be about $26b to get this loss – 26b * 10% = 2.6b @ 12.5% = $325m

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  23. lyndon (325 comments) says:

    The 2% drop in food prices should probably be seen in the context of a 17% rise in the previous 2 years.

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  24. KiwiGreg (3,255 comments) says:

    “Fresh fruit and vegetables are easy to define. They are unprocessed, they look like they did when they were picked/removed from the ground. ”

    So are washed potatoes unprocessed? What say they are peeled? Peeled and sliced? Peeled and sliced and lightly cooked in oil going too far? If they’ve been stored for a year are they “fresh”.

    How much packaging is ok before they stop looking like they did when they were picked?

    What about dried fruit, are raisins and sultanas in or out?

    Imported or just home grown?

    Apples ok but juice not?

    Are we zero-rating just fresh fruit and vegetables sold to consumers or the stuff Watties buys as well?

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  25. bchapman (649 comments) says:

    Whats the use of having a government if it can’t take steps to support the good health of its citizens. I would have thought this was a simple and effective way of dealing with obesity and diabetes epidemics we are facing. If it were so complicated, why are rentals and financial services not GST taxed?

    I ceratainly don’t see any Australians regretting the decision they made to exempt these items back in 2001.

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  26. ben (2,380 comments) says:

    Oh dear lord. What a nightmare this would be.

    Producer 2 buys fresh fruit from Producer 1. GST free.

    Producer 2 dries said fruit. Sells to Producer 3. Maybe GST free, maybe not. Depends on how much you spent on lawyers.

    Producer 3 puts dried fruit in muesli bar and covers in yogurt. Sells to supermarket. Not GST free.

    Multiply by 100 million for every production pathway in the economy associated with healthy food in some part. Add lawyers, green lobbyists, social equity advocates, and politicians. They will yell at each other call day over where the cut off for healthy food starts and ends. And they will do that wherever the cut off line is. All of that argument is deadweight loss. The only answer is not to have a cut off line.

    Isn’t New Zealand poor enough already?

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  27. KiwiGreg (3,255 comments) says:

    “Whats the use of having a government if it can’t take steps to support the good health of its citizens. I would have thought this was a simple and effective way of dealing with obesity and diabetes epidemics we are facing. ”

    You would be wrong. You assume the price of different types of food has some impact on obesity.

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  28. KiwiGreg (3,255 comments) says:

    Of course the same clowns promoting this don’t accept that taxing work and savings results in less work and savings.

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  29. dog_eat_dog (781 comments) says:

    Sure, as long as we no longer have to pay for obesity related health problems. You can’t have it both ways.

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  30. dave (988 comments) says:

    I dont think borrowing $330m extra a year to cover GST is a big issue at all . After all its less than the government currently borrows every 36 hours… and if people are eating more healthier that’s a lesser strain on the Health system. The real problem is what foods you include and exclude.

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  31. Jibbering Gibbon (198 comments) says:

    Almost my entire diet is on the proposed GST free list, but I’m willing to take the theoretical financial loss if it means the government get their simian fingers out of my fruitbowl.

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  32. KiwiGreg (3,255 comments) says:

    Extending this policy. All sports equipment including running shoes should be zero-rated to encourage healthy activities.

    So should all sunblocks (other than those which are included in cosmetics) to reduce skin cancer.

    All medical procedures and pharmaceuticals should be zero-rated to lower the cost of health.

    Education is vital and should be zero-rated to make it more affordable.

    Water is a basic right and all water charges should be zero-rated. So is electricity. Ohh and broadband.

    We could go on….

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  33. stephen (4,063 comments) says:

    The proposal of course ignores the fact that retail commodities are generally priced up to what the consumer is prepared to pay. A greengrocer does not observe set margins, he prices product according to demand, freshness and availability. Remove GST and the sale price will remain the same.

    Don’t you need to factor in competition to some extent?

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  34. david (2,557 comments) says:

    There may well be some distortions in the way costs are covered along the supply chain.
    Small growers who find it convenient these days to not register for GST nwould have to register in order to claim back GST on their input costs (fuel, fertiliser, tractor repairs, seedlings etc etc) which will still have GST on them. Presumably the exemption would start at the farmgate so the grower’s income would not have a GST component and the grower would have to seek recompense from the IRD. This may have cashflow and timing issues for the grower’s business operation.

    Equally, a food processor will be buying “fresh” produce which has no GST component in the price (except perhaps for the costs of getting the “fresh” produce from the farm gate to the factory. All factory inputs except labour and finance will have GST on them and the output of the factory will be sold with GST. The processor will then become a large net payer of GST that he has collected (even though if he has adopted the accruals method he may not have received any cash at the time the IRD require payment) This will have cash flow and timing issues for the processor and may require additional financing via borrowing.

    I may not have yet thought through all the implications but then I think neither has the Maori Party. What I do know for certain is that opportunities to rort the GST system will become available and will, not “might” …. “will” be taken up.

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  35. Bevan (3,924 comments) says:

    I ceratainly don’t see any Australians regretting the decision they made to exempt these items back in 2001.

    Wow, do you really think that in a country of 20 million people, not one person is against the GST laws exempting healthy food?

    I have a bridge in Broklyn for sale if your interested

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  36. davidp (3,581 comments) says:

    yeswedid>Fresh fruit and vegetables are easy to define. They are unprocessed, they look like they did when they were picked/removed from the ground.

    Not bread then. Or any sort of meat, unless you skin it yourself.

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  37. Brian Smaller (4,023 comments) says:

    Britain and Australia already have VAT/GST exemptions for some food types. There rules are not perfect but clearly having different tax levels for different food products is not an impossible task.

    So the bureaucracy works. So what? Will it actually make people buy “healthy” foods? We already know the answer to that. It is “No it wont”.

    Stand in almost any supermarket checkout and look at the familes buying groceries – from all walks of life – and just look how much shit there is in there – chippies, soft drink etc. That will not change because an apple costs 15% less.

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  38. david (2,557 comments) says:

    @bchapman 10:18
    When have you ever seen an Australian admit they got something wrong?

    I do know that Australian tax professionals of my acquaintance look with undisguised envy at the simplicity and lack of distortions created by our system.

    What you don’t hear about are the estimates of tax leakage caused through large scale mis-application of exemptions. So widespread that the detection systems can’t cope so they have become endemic within the overall tax structure. And before anyone demands links or evidence – these comments are anecdotal and based on personal observations only so don’t bother.
    Australia’s ‘grey economy” is proportionally much larger than NZ’s largely as a result of their botch-up of GST

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  39. PaulD (97 comments) says:

    There’s so little fruit sold at supermarkets they need silly stickers reminding the checkout what an apple is.

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  40. kevin_mcm (152 comments) says:

    Again, the process side of this is easy. If you are registered for GST then you get to claim your inputs that have a GST component. If you outputs are GST exempt, then you will get a refund. Firms in this position will change to monthly/2 monthly GST returns to avoid any cashflow impact.

    As it stands at the moment F&V would be quite easy to define (as easy as second-hand goods sold at auction which are also exempt) so I do not believe that is the issue.

    There are two issues:
    1. The loss of revenue – presumably this would have to be offset by an increase somewhere else – I don’t see any political party fronting up to that issue.
    2. The speeding camera problem – once a new exemption is passed, the politicians will use exemptions as a political football. It will NOT stop here (remember when sppeding cameras were first introduced and the claims about use etc then).

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  41. backster (2,172 comments) says:

    The Labour support is motivated by the necessity to build a bridge to the Maori Party. DPF in his political analysis has yet to
    to factor in Maori support in determining the outcome of future elections. That support goes to the highest bidder hence we are already seeing major concessions by National to Maori. Labour doesn’t have to make any actual concessions until Maori hold the balance of Power after an election but they do need to maintain goodwill by supporting Maori initiatives.

    In terms of efficient economic practice the proposal doesn’t add up but that has never been a consideration for Labour or Maori.

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  42. jcuknz (704 comments) says:

    There is nothing wrong with fish and chips and other take-aways in moderation. It is obvious that New Zealand is the only sensible country, thanks to Sir Roger Douglas, when it scrapped all the various taxes and duties and introduced a uniform GST. The Irish example is brilliant , confirms the stereotype image of the Irish mentality :-)

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  43. Murray (8,847 comments) says:

    David ““growing support” and “building momentum”” are code for the media have decided to drive the issue.

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  44. Paulus (2,627 comments) says:

    I am awaiting some intelligent analysis from Labour on the financial effect of their wishes.

    Cost analysis please Labour. Cut on these food etc items, so where does financial balance come from – tax the rich (but they have all left).

    Labour are great, until they run out of other people’s money to spend (Thatcher).

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  45. Murray (8,847 comments) says:

    I am awaiting some intelligent analysis from Labour… waaaahahahahahahahaha. Good one.

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  46. slightlyrighty (2,475 comments) says:

    So If Macca’s has to pay GST on what they sell, but not on what they buy, given the healthy status of the bread, lean meat, veg and some dairy product, what will that do for their bottom line?

    How do you calculate GST on a Big Mac?

    Message to Labour. Keep It Simple, Stupid!

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  47. Murray (8,847 comments) says:

    Thats why Phils in charge.

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  48. Put it away (2,878 comments) says:

    This is just painfully lame, empty-headed and clownish. Labour increasingly appear to be living inside a cartoon or sitcom.

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  49. Ross Miller (1,704 comments) says:

    Bob Jones once described Bill Rowling as a shiver looking for a spine to run up on.

    Present day translation might be that Phil Goff is a headline looking for a story or vice versa … your call.

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  50. kowtow (8,487 comments) says:

    I love the way the academics and pollies supporting this blame price for fat lazy slugs’ poor decision making.

    Fruit and veg could be given away for free and the fat slobs you see rolling and lolling all over the place these days would still stuff their useless faces with cream cakes ,soft drinks and chippies.

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  51. Murray (8,847 comments) says:

    HEY! I do not eat cream cakes thank you.

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  52. burt (8,271 comments) says:

    I can understand why Labour think this is a good idea, becasue they thought it was a crap idea before they got turfed out of power. Needless to say their motivators for policy are as transparent as ever… will it win enough votes to let us govern…. No more no less. Is it a good idea for NZ… well that’s not even in the frame.

    We have a vast welfare system which was put in place to make sure low or non earners have sufficient money to live, would be far to simple to adjust the social wage, much more fun to play with retail prices because it wins votes.

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  53. RKBee (1,344 comments) says:

    Tauhei Notts @9:25 am
    This would be an unnecessary subsidy for the rich, for they are the ones that buy healthy food.

    Except for the obvious extra costs and bureaucracy.. this should be the reason National should vote for it… It fits their known philosophy of tax cuts for the rich and their policy of cutting government spending… ie Social Services.

    The $330 million a year in tax revenue which would have to be found somewhere else.. Will no doubt come from the lower social economic level… mainly Maori and Labour constituents… through either higher taxes on their smokes and alcohol or from the social services they use.

    This only shows the Maori Party’s naivety… and Labour are just plain mean… taking advantage of its own and Maori Party supporters ignorance of political economics and how the real world works… remember Goff was against this… he now shows how desperate he is for the sake of a little political exsposure.. he pertrays his own values and his party’s lower social economic constituents.

    In the real world if there are costs.. it is not the well to do that pay.. it is always the ones that can least afford it.

    National core supporters will be laughing.. its a win win either way for them… and best of all Maori want it.

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  54. burt (8,271 comments) says:

    We need a peoples food store. Get Jolly Jim onto it – he could spend millions and millions of tax payers money establishing a nation wide chain of low cost food retailers which make no profit to force the big nasty greedy supermarkets into lowering their prices. Jolly Jim’s KiwiMarket, the peoples food store, could show the world how communism works for the people…. Hey we did it for banks….

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  55. Put it away (2,878 comments) says:

    “Fruit and veg could be given away for free and the fat slobs you see rolling and lolling all over the place these days would still stuff their useless faces with cream cakes ,soft drinks and chippies.”

    Yup it’ll be pushing shit uphill unless they can find a way to make fruit and veges with the colonel’s eleven secret herbs and spices.

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  56. burt (8,271 comments) says:

    Why not have progressive GST in shops. When a rich prick turns up to buy a bunch of bananas they could be $50,000/Kg but when they are being sold to lower income people they could be $0.01/Kg. We could all be microchipped and scanners in the shops could determine our individual GST rate based on our earnings…..

    OK, how would Labour turn this into a vote winning policy… Oh I know, if you don’t earn over the rich prick threshold you don’t even need a microchip…. Chip the rich pricks….. that’s the idea Goff – go for it.

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  57. KiwiGreg (3,255 comments) says:

    “Bob Jones once described Bill Rowling as a shiver looking for a spine to run up on.”

    Wasn’t it Muldoon who said that?

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  58. YesWeDid (1,048 comments) says:

    Burt – that is how rates work.

    It is obvious that a lot of people commenting here have no idea how GST works when you are a business.

    It would be nice to have a filter that cut-out all the comments that basically said ‘Labour came up with this therefore it must be a bad idea.’

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  59. Murray (8,847 comments) says:

    Chocolate covered deep fried apple..mmmmmmm..

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  60. burt (8,271 comments) says:

    YesWeDid

    The flawed model of using property values as a proxy for how much you pay in rates is a last bastion of socialism, it exists because it is easy to administer – not because it is fair or equitable.

    Sadly the same ease of administration stipulates one rate of GST.

    However can you clarify – do you think ease of administration should be the major driver for revenue collection while we disregard fairness ?

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  61. RKBee (1,344 comments) says:

    Thinking outside the square…

    If snap frozen food is more nutritious than fresh veges in the supermarkets.. why not take advantage of this and store a large portions of our perishable seasonal healthy foods veges etc that is able to be frozen… and store them down at Scott Base in the antarctica untill required in the off-season… or even in times of food shortages or famine..

    That’s a way to keep prices down and keep food nutritious and healthy..

    Just an Idea…

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  62. burt (8,271 comments) says:

    RKBee

    Do you own a shipping company ? Food miles RKBee…. seasonal eating…. However great that you are thinking outside the square.

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  63. LaoHu (6 comments) says:

    I can recall an Australian lawyer telling me that the NZ GST regulations are a nice compact document while the Australian GST regulations take up almost one metre of his shelf space largely because of all the exceptions and exemptions. He said depending upon where you are coming from the Australian GST regulations are either a minefield or a goldmine. He said that the NZ system is far easier for business’s – you pay it on everything with no exceptions.

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  64. burt (8,271 comments) says:

    I’m not sure of my facts here but it seems to me I would pay zero GST on food I grow in my own garden….

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  65. Yvette (2,820 comments) says:

    “Revenue Minister Peter Dunne said Ms Katene’s proposal wasn’t viable because of problems around defining what constituted healthy food. Furthermore, removing GST from the food specified in the bill would mean the loss of about $330 million a year in tax revenue which would have to be found somewhere else.”

    Round New Zealand population from 4,296,756 down to 4 million [maybe takes out toddlers not on solids]
    $330,000,000 lost revenue, divided by 4 million population = $ 82.59 a year per person
    divide by 52 weeks =
    saving on GST per person per week = $ 1.58

    Mercury Energy price increases about $ 5.00 a month for electricity, $ 1.75 for gas = $ 6.75 a month
    or $ 1.68 a week

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  66. RKBee (1,344 comments) says:

    Burt.. I’m not sure of my facts here but it seems to me I would pay zero GST on food I grow in my own garden….

    So that’s it vege prices are so high people are starting to grow their own.. no GST … except for the initial buying of the seeds slug control etc.

    Yvette.. Its better when you write in french… then the masses don’t know when you taking the piss.

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  67. Yvette (2,820 comments) says:

    RKBee – I wasn’t intending to take the piss, I think.
    It’s just that the saving per person does work out to about $ 1.58 a week.

    My point is that to change GST would be a massive job with legal hassles for a relatively small gain, which may be put in perspective by the fact power prices go up by ten cents more than what he GST change would save, and apart from a few grumbles, nothing happens. There will be a few more complaints when people actually get higher bills, but it is probably already accepted – unfortunately.

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  68. J Mex (190 comments) says:

    The idea, while good in theory (kinda), is a bloody nightmare administratively.

    Most people who support the idea, seem to just think of supermarkets, but what about lunch bars, restaurants etc.

    If I am a restaurant owner I will be buying produce from a supplier. At the moment I might buy $2000 worth of product. The GST is easy to calculate – $222.22. If this law change is made, easy purchase I make from that supplier will have a different GST amount, depending on what my purchase was this week. When I prepare and sell that produce, what GST I pay on income isn’t an easy calculation, it will vary depending on what I did with it. It will be a nightmare.

    Is fresh fish o.k? Is crumbed fish, is battered fish?

    Are oranges o.k, orange juice, fresh orange concentrate?

    Is bread ok? Lettuce, chicken? What if that is all in a filled roll? What if that is all in a filled roll with mayo? What if I substitute the bread for rice and call it sushi?

    What about fresh peanuts? what about salted peanuts? salted and roasted? Is butter o.k? What if I add the butter to the peanuts?

    You get the drift. I find that most supporters of this idea have got about a far as “Carrots, lean chicken and spinach are good for you. Let’s do this thing!”

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  69. transmogrifier (522 comments) says:

    Ridiculous idea. Either have GST or don’t – there is no need for exemptions. Typical politicians making simple thinks complicated in order to look like they are doing something. I won’t vote for any party that makes this a policy.

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  70. Johnboy (16,597 comments) says:

    After watching this:

    http://www.youtube.com/watch?v=xXlWsBhFvis&feature=related

    I believe the Goods and Services Tax (Exemption of Healthy Food) Amendment Bill should be debated under urgency. :)

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  71. Rex Widerstrom (5,354 comments) says:

    Remove the social engineering component and it’s do-able: just remove the “healthy” descriptor. Make food (defined as anything shove din your gob and swallowed) GST free and help the poor (who spend a far greater proportion of their income on food) that way.

    So if Labour were genuinely concerned at the cost of food to low income eraners and beneficiaries they’d compromise and propose that. But no, they want some advisory board full of their cronies hand-picking what’s “good” for us. Maybe it’ll be yet another job for Dianne Yates, given her vast and deep knowledge of food from being… errr… from the Waikato.

    So fruit and veges are 10% cheaper without fiddling with GST, which would cause the Government to borrow a further $330 million a year.

    Or National could offset it by saving $330 million a year of our money by, say, making MPs pay for their food, home phones etc out of their generous salaries. Or giving any public servant with the title “Policy Analyst” a week to explain exactly WTF they do all day or face redundancy. Or putting an end to taxpayer funded “fact finding” trips by MPs to coincidentally warmer countries during the winter recess. Or…

    But nah, let’s just spend like there’s no tomorrow and keep borrowing. I’m sure that will work out okay.

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  72. Yvette (2,820 comments) says:

    3:20 –
    http://www.youtube.com/watch?v=xXlWsBhFvis&feature=related

    It worries me, Johnboy, what it is that you are looking for, when you find things such as this.

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  73. Johnboy (16,597 comments) says:

    Il inquiète moi également Yvette. Peut-être je dépense trop longtemps avec les moutons ?

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  74. nickb (3,687 comments) says:

    This would be a mindfuck of epic proportions… legions of tax lawyers and accountants running round lobbying for more exemptions, loopholes, trying to get their clients products into the exemptions, etc…. These cots would then be passed on to consumers, prices go up even more…etc etc

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  75. reid (16,471 comments) says:

    As several alluded to above, the difficulty is not only in determining “what is an exempt item” given that even a greasy takeaway can put fresh lettuce in a cheeseburger but the critical thing is:

    If you have an exempt (as opposed to zero-rated) item, then you can’t claim the GST on what it cost to produce that. Which means lettuce farmers can’t claim for the GST charged for their costs, except sometimes, when they produce items that don’t meet the exempt criteria.

    Neither can the transport company claim the GST on their costs when they pick up that farmer’s produce, as opposed to the farmer down the road, who doesn’t produce an exempt item, in which case they can and do. But what happens when a farmer produces both exempt and non-exempt items. Oh dear.

    And we haven’t even left the farm gate.

    Long story short. Move through the supply chain and the nightmares increase.

    Don’t just focus on the retailer in deciding whether it’s a good idea. GST is a CONSUMPTION tax. That means every time someone somewhere in the supply chain adds value and makes a profit on moving it on, there’s a plus and a minus equation.

    You start introducing exemptions and you significantly disrupt that well proven harmony that’s operated smoothly for 27 years with no real issues. Ever. And for what net result?

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  76. Caleb (479 comments) says:

    just give all the kids at school a bag of veges once a week…. ffs.

    you can lead a horse to water…

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  77. Yvette (2,820 comments) says:

    I’d repeat [from 1:50pm],
    using Revenue Minister Dunne’s figure of $330m cost of this GST change,
    divided by 4m New Zealanders, divided by 52 weeks
    gives a saving on GST per person per week of $ 1.58

    It was suggested I was ‘taking the piss’, but considering the difficulties defining what is exempt and what is not, and the administration of that, let alone public advice, is a 22 cents saving a day worth it?

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  78. krazykiwi (9,186 comments) says:

    Or giving any public servant with the title “Policy Analyst” a week to explain exactly WTF they do all day or face redundancy.

    I second that suggestion.

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  79. reid (16,471 comments) says:

    “using Revenue Minister Dunne’s figure of $330m cost of this GST change,”

    I bet that figure was simply based on estimated revenue lost, seeing as the IRD tend not to focus on what it costs for businesses to comply with their regulations (for some inexplicable reason).

    Taking those into account, what are the compliance cost to businesses all round the country running through the supply chain? Any business anywhere that deals with exempt items has to modify their accounting systems. Not just the sales systems, but the payment side as well, since they can’t now claim the GST component on the electricity it cost to light the goods in their fruit and vege dept. But they can still claim the electricity costs for the rest of the store. But not for the milk cabinet in the corner. Etc. Etc. Etc. Etc. Etc. Etc.

    Nightmare. Period.

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  80. bchapman (649 comments) says:

    GST inputs get refunded back in full. The only person who pays it is the end user. It would be easy to work out the diffeernce between the different categories.

    On my last GST return there are 2 categories GST-exempt and GST- inclusive. What is so hard about that? I you wanted life to be uncomplicated- you wouldn’t bother getting out of bed. In fact why not just live on a deserted pacific island- no GST forms to worry about there

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  81. ch123 (647 comments) says:

    “since they can’t now claim the GST component on the electricity it cost to light the goods in their fruit and vege dept. But they can still claim the electricity costs for the rest of the store. But not for the milk cabinet in the corner.”

    What a complete load of bollocks. You’ve obviously never been in business.

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  82. reid (16,471 comments) says:

    “I second that suggestion.”

    Policy analysts translate govt and legal directions into reality on the ground. Get rid of them and you have no translation between Parliament and the various branch offices around the country that do various things on a daily basis.

    Is that a good thing or a bad thing? No benefits, etc. Also no subsidies. No WFF tax credits, etc.

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  83. reid (16,471 comments) says:

    “What a complete load of bollocks. You’ve obviously never been in business.”

    Well I’ve been self-employed as a Business Improvement contractor many times and you don’t get paid for that unless you produce results and a long long time ago many previous lives ago I also used to be a GST auditor and have seen many many many accounting/business issues arising therefrom so I do know of what I speak re: this, ch123 (5).

    Yes, I’ve never personally owned or run a business. I have however in the past explained many times to small and large operations how they needed to properly account for their GST and stop doing various things that were counter-productive and would lead to tears. I’ve also seen many business tragedies that didn’t need to be.

    So maybe you’re right, ch123, and maybe you’re not. But this issue is hardly about my experience vs yours, is it? It’s about how GST as a consumption tax works most efficiently. So how about sticking to that particular issue.

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  84. krazykiwi (9,186 comments) says:

    Policy analysts translate govt and legal directions into reality on the ground

    @reid – that is, perhaps, the theory.

    I know quite a few policy analysts. Working in Wellington for 25 years makes it impossible to not to know plenty of these creatures. They are, IMO, to the state sector what dydimo is to the environment.

    The smart policy analysts talk quickly and effusively to justify their output:salary ratio over a wine or two, becoming animated at first and agitated when pressed, while the not so smart ones just look a bit embarrassed and change the subject.

    The transation of govt and legal direction into reality could be effected with a fraction of the current policy analyst FTE’s in my view.

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  85. ch123 (647 comments) says:

    @reid GST is really quite simple. You pay the IRD GST you have collected less the GST you have paid. In the event you paid more than you collected, then you get a refund. It’s trivially easy to deal with items that are exclusive of GST and companies do it every day anyway. For example there are already exclusions, and items imported and exported do not have a GST component.

    However, I’ll agree with anyone here that how you define what is “healthy” is just impossible and the Maori Party definition of what should and shouldn’t be excluded is just daft. It opens a whole can of worms and won’t make any difference whatsoever in any case. The beauty of our GST system at the present time is it is so simple, and as soon as you start introducing a bunch of exceptions it starts getting very difficult.

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  86. RJL (146 comments) says:

    @ch123

    It’s trivial to define a set of foods in legislation, that GST shouldn’t be applied to. The label “healthy” is what is distracting you. The idea is that you make a rule that exempts some foods that are healthy, rather than exempting all healthy foods.

    Take a look at the current food legislation on something like nutritional labelling. It is compulsory to include nutritional information on all sold food. However, the legal framework is quite capable of exempting whole foods such as oranges, lettuces, and steak from this requirement. It’s easy to do something similar with GST. It just requires political will.

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