GST on “healthy food”

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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