Labour abandon their own GST principles

September 27th, 2010 at 7:15 am by David Farrar

Phil Goff today abandons the concept of a simple all inclusive . Taxation experts time after time praise our for its relative simplicityand fairness as it applies to everything.

The Herald reports:

A -led Government would scrap GST from fresh fruit and vegetables to encourage healthy eating and help New Zealanders as higher GST on other goods is imposed.

This is an exceptionally bad move, because it is the start of a very slippery slope.

For 25 years, lobby groups have pressed National and Labour for a GST exemption for their pet cause. Up until Phil Goff, major party leaders have had enough fortitude to say no. They have said GST is about having a consumption tax – it is not a device for designating what goods are “good” or “bad”.

Once you concede that principle, you can’t say no to all the other requests. We saw this in Australia, where a Government had to exempts tampons from their GST, because of a campaign.

By saying fruit and vegetables will be exempt (as they are good and healthy), how can a Goff led Government possibly stand firm against say a campaign to reove GST off medicines? I mean, how dare the Government tax people for being sick.

Next to go will be GST off doctor’s visits.

Then my God, how dare you tax the school bus. That must become GST exempt.

Tags: ,

113 Responses to “Labour abandon their own GST principles”

  1. Grant Michael McKenna (1,157 comments) says:

    Paying GST for visiting a prostitute is discriminatory, as it encourages people to visit hookers who operate without paying tax, so cancel GST on hookers.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. Pete George (23,310 comments) says:

    Phil’s pointless populist pandering.

    Will it be forgotten by 2014? 2017? The lobbyists will probably remain hopeful but Labour might have acquired enough sensible MPs by whenever.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. Lee C (4,516 comments) says:

    They can’t even get the actual facts right – or represent themm honestly – http://monkeyswithtypewriter.blogspot.com/2010/09/guyon-and-cunliffe.html

    Thnx MWT

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. Inventory2 (10,174 comments) says:

    I would have thought using the words “Labour” and “principles” in the same sentence was rather oxymoronic …

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. Rob Salmond (260 comments) says:

    1. I think this in an excellent proposal. It reduces our over-reliance on a regressive form of taxation, promotes healthy choices that improve lives and save taxpayers money on healthcare down the line, and is based on plenty of overseas precedent.

    2. It is telling that DPF’s argument against a proposal about fruits and vegetables relies on some far-fetched hypothetical story about school busses. Not content with comparing apples to oranges, he’s comparing apples to school busses! This shows the direct argument for charging GST on fruits and vegetables is weak.

    3. The vast majority of OECD countries already have no GST on fresh fruits and vegetables, and yet plenty of still charge consumption tax on school busses and medicine and doctors visits. So the empirics directly contradict DPF’s fantasy slippery slope argument.

    4. Tax Experts are right to praise New Zealand’s GST for its efficiency, but efficiency is not the sole goal of the tax system. Fairness, promoting innovation, and promoting good choices are three of many other legitimate goals for the tax system. Policy makers have to balance these competing goals, a difficult task that Tax Experts are spared. The most efficient income tax system, for example, would have a flat rate at all levels of income and across all forms of income, with absolutely no exemptions for anything. Goodbye R&D credits, business expense deductions, progressive taxes, child tax credits, etc. I’m sure there are plenty of Tax Experts willing to praise the efficiency of that system, too. But that doesn’t mean we should adopt it.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. Pete George (23,310 comments) says:

    Ok Rob, let’s compare apples to apples. Under this proposal what apples would be exempt? Only raw apples? Cooked apples too? Apple juice? Apple cider?

    What about ll of something where apple is the main ingredient, such as in apple salad or toffee apple, or just the apple component? If so, how would that work?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. first time caller (384 comments) says:

    I think it’s interesting for Labour in a strategic sense. They’re really putting Cunliffe out there in a very risky position. What happens for Cunnliffe when this idea doesn’t provide them with the circuit breaker they seek?
    More desperation. That’s how it looks to me.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. Lance (2,557 comments) says:

    It would be socialist Nirvana
    So completely complex and subjective would the working out of this theory be that a veritable army of more civil servants would need to be hired.
    Whats more they could be given search and seizure rights.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. MT_Tinman (3,043 comments) says:

    Labour reducing a tax?

    Classic!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. slightlyrighty (2,499 comments) says:

    So lettuce, bread, dairy products and lean meat will be GST free, but a Big Mac won’t be?

    The cost of running such a system will have to be offset by either reducing spending in other areas, or increasing personal tax.

    Dumb, stupid populist politics at its very worst, worse than interest free student loans.

    Wake up NZ. Labour is trying to bribe you with your own money.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. Rob Salmond (260 comments) says:

    Pete – As I understand it, raw apples would be exempt, but not any of the other items in your comment.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. Pete George (23,310 comments) says:

    Raw whole apples only?

    If a fruit juice kiosk in a mall sold me some whole raw apples would it be ok if I was allowed to use his complementary juicing machine service?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. Rob Salmond (260 comments) says:

    Yes.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. Inventory2 (10,174 comments) says:

    So, when I go to get my feed of fish and chips, will I be paying GST on the fish only, or the whole parcel? What an administrative nightmare Goff and Cunliffe are seeking to impose on us.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. Rob Salmond (260 comments) says:

    That “yes” before was the for the raw apples question.

    And I’ll answer your hypothetical with an analogy. In New Zealand, aparement purchases are currently GST exempt but hotel room rentals are not. Do you see hoteliers declaring their rooms as small apartments, “selling” them to people every night, then “buying” them back the next morning for $149 less than the sale price? That would save the customer the GST, even under the current system.

    No, you don’t see that. And nor would you see the silly juicer service scam.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. Rob Salmond (260 comments) says:

    I2 – You would be paying GST on the whole package of fish and chips. A french fry is not a fresh fruit or vegetable.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. Pete George (23,310 comments) says:

    Are carrots still whole if the tops are cut off them? Are lettuces still whole if they have been cut off the root, and outer leaves removed?

    This might sound like trivia, but it isn’t when it comes to legislation. Overseas experience has shown that suppliers try and work their way around the laws.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. Simon (714 comments) says:

    Does 15% come off the salaries of Labour MPs as well?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  19. Inventory2 (10,174 comments) says:

    But Rob; the chippie I go to still makes his own chips daily, out of fresh potatoes. No half-cooked, frozen ones for me! Surely, the chippie wouldn’t have to pay GST on his sacks of freshly-dug spuds …

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  20. Guy Fawkes (702 comments) says:

    Hopefully Australian Apples are still to be taxed? And Cape? EU.

    GST should only be zero rated on NZ produced produce. NOTHING ELSE if at all.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  21. Viking2 (11,262 comments) says:

    Feeding a Troll. Will that be GST free?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  22. Rob Salmond (260 comments) says:

    Pete – The point you make is a good one, but I think the drafters can fairly easily make a workable law on this one. Maybe something like:

    1. To be exempt from GST, an item must be a fruit or vegetable (which have standard definitions) and be “substantially whole and free from substantial alteration from their natural state”
    2. “Substantial alterations” include, but are not limited to, slicing, juicing, cooking, [etc etc etc]
    3. Trimming and cleaning products for sale does not constitute substantial alteration from their natural state (this would mean that the trimmed carrots and lettuces you mention would retain their GST free status)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  23. Rob Salmond (260 comments) says:

    I2 – Correct, the chippie would not have to pay GST on his raw spuds, as he is buying fresh vegetables. You, on the other hand, are not buying fresh vegetables, and would therefore pay GST.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  24. sonic (2,818 comments) says:

    In the UK they manage to have VAT exemptions on things like children’s clothes and most foods.

    It is hardly beyond the wit of man to arrange that.

    see for example

    http://www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htm

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  25. Adolf Fiinkensein (2,830 comments) says:

    You can say anything you like when you are polling eight percent and your party’s fucked.

    Has anybody stopped to think long enough to realise Rodny Hide has more chance than Phil Goff of being a cabinet minister next year?

    And as for Cunliffe! This man is the dildo of NZ politics. Pops up every now and again when the real thing won’t work and provides a moment’s hermaphroditic titillation.

    (That last bit will be beyond most of the leftie commenters here – (Cun*liffe + dildo, go figure)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  26. Gwilly (156 comments) says:

    National are paying the price (pardon the pun) for increasing GST. Roger Douglas once said to me that 10% was always seen as acceptable, but once it was increased above this figure, governments ran the risk of lobby groups pushing for exceptions, which is what we are seeing now.

    Personally I have always thought it was unnecessary to increase GST, and I’d rather see National reign in their prolific spending instead.

    The second reason was that politically they are taking an unnecessary risk increasing a tax that hit all voters in the pocket. They have given Labour the perfect opportunity to gain some traction here. Only a small minority realise that making exceptions is not ideal and complicates the collection and administration of GST, but the masses simply don’t, and couldn’t care less.

    This along with ETS are the two largest mistakes National has made so far, in fact stupid mistakes, neither of which were necessary.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  27. davidp (3,557 comments) says:

    What do Labour have against fresh mushrooms? Why do they want to tax them?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  28. Pete George (23,310 comments) says:

    If I buy an apple I would not have to pay GST. If I buy a bag or box of apples presumably I’d have to pay GST on the packaging? So the apple seller would have to separate the goods being sold for tax purposes? It would be simpler just to give away the packaging, but that is tax avoidance. What’s to stop him inflating the price of apples and giving away other stuff too?

    Trimming and cleaning products for sale does not constitute substantial alteration from their natural state

    If some lettuces leaves were trimmed and sold along with some tomatoes I could buy them GST free? In a cafe that provides complementary (as is common) cutlery and condiments?

    “Substantial alterations” include, but are not limited to, slicing, juicing, cooking,

    Slicing both ends off a carrot is ok, the same for a cucumber? What about half a cucumber? A sixteenth of a cucumber?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  29. krazykiwi (9,189 comments) says:

    I think it’s nuts to have differential GST rates. As DPF points out once the principle of consistency is broken there will be a free-for-all from vested interests, increased compliance costs and the tax challenges of businesses that straddle the GST free/payable boundary. Simply saying differential rates have been implemented in other countries, as if to suggest that things that happen outside NZ are ideal, is also nuts.

    That said, NZers need to produce more and consume less.. and having the government income tied increasingly to our consumption isn’t likely to achieve this. Any thoughts on the sense of having GST at all?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  30. Rob Salmond (260 comments) says:

    Pete – You can easily deal with the packaging thing by exempting fresh fruit and vegetables, and packaging that has the sole substantial purpose of holding fresh fruits and vegetables. The prepared salad thing clearly would not be GST free, as “a few loose lettuce leaves” is a substantial alteration from “a whole lettuce.” And with the stuff about halves and sixteenths, they are not “substantially whole.” As Sonic said, there are plenty of countries that have rules similar to this already – it is all perfectly doable. And if your biggest practical concern is about tax shenanigans involving sliced apples and simple salads, then I suggest civilisation is pretty safe.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  31. Captain Neurotic (206 comments) says:

    The only people who are going to profit from this, is not the poor families, rather the lawyers! Statutory interpretation baby, lawyers are going to have a field day.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  32. bhudson (4,736 comments) says:

    How about how Labour propose to pay for this?

    They have stated they will use the increase in tobacco tax to pay for $200m of the estimated $250m cost of this. So the smokes pay for 80%. Where is the other 20% coming from David, Phil? (Perhaps they haven’t noticed we are already having to borrow heavily to cover their previous “tax a great deal, but spend even more” spree – while also trying to put the country on a better long term footing by rebalancing the tax system.)

    Of course they also don’t mention that the stated purpose of increasing tobacco tax is to reduce consumption – which, if it achieves it laudable aims, will have the effect of reducing the tax take. What level of reduction has been factored in which will still enable an additional $200m? Any at all? Less than achieved with previous tobacco tax increases? Wouldn’t it be quite hilarious if the numbers show that they actually needed a net increase in consumption to pay for this?

    One thing is certain by their own admission – they require a level of tobacco consumption that will bring in an additional $200m in tax. That would hardly seem to be in line with an aspiration to reduce smoking and improve the health of our citizens!

    At the same time Phil & Co are placing their own unique twist on the historic legend of the good fellows (or should tha tbe goodfellows?) of the forest… As smoking is prevalent among lower income earners and smoking is going to pay for 80% of this GST bribe, “David the Hood” is proposing to “rob the poor to give to the poor.”

    That should earn him a lot of kudos.

    Perhaps a little worse when you consider that the poor among the smokers will be subsidising the lower priced, GST fruit & veges for the wealthy non-smokers. “Rob the poor to feed the wealthy”.

    Yep, Phil & David sure know how to connect with their core constituents. (Or perhaps this is an admission on their part that the pooer, lower income earners, working class are no longer Labours core constituents?)  Keep it up lads!!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  33. Captain Neurotic (206 comments) says:

    Seriously Rob – I’m in the law library now with my mates, no matter what the situation you will be able to define, re-define, then re-classify anything! I hope this law goes through, I’m lucky enough to have a job when I graduate next year, my friends now see a market that they can go into specializing if making a food supplier GST free!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  34. JohnG (22 comments) says:

    Ummm – surely Rob Salmond’s initial post (7.48) was satire? So why is it being taken so seriously? But I am enjoying the thread… might retrain as a lawyer.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  35. Monty (966 comments) says:

    Here is the reality – the average spend on fruit and Vege for a family is between $10 and $30 pe week. but lets say $30 (I was down at the market here in Wellington yesterday and bought all the fruit and vege as well as eggs and a coffee all for less that $40. Take off the GST and that would be a saving of $4.50.

    The media need to start asking Goff exactly how much extra money that will put in the pocket of the “ordinary” family. Here is the other point – will Pak’n;save reduce the price of a kilo of apples to say $1.80 – when they know the market will tolerate the exiting price gst inclusive of say $1.99 per kilo and pocket the additional profit. I would suggest that they would.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  36. Simon (714 comments) says:

    “it is all perfectly doable”

    Helen Clark PM 1999 to 2008.

    So full of shit your GST rate should be 100%.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  37. Rob Salmond (260 comments) says:

    Captain Neurotic – It does not surprise me that your are an undergraduate law student, because with the sentence “no matter what the situation you will be able to define, re-define, then re-classify anything!” you demonstrate an awe-struck overestimation of the powers of the legal profession. I predict that your friends’ windfall from this new industry will be brief and small.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  38. Roflcopter (446 comments) says:

    Simon said:

    “Does 15% come off the salaries of Labour MPs as well?”

    No, as these are stale vegetables.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  39. dime (9,662 comments) says:

    Dam right Hookers shouldnt charge GST!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  40. Gwilly (156 comments) says:

    The problem Labour are likely to face is one of credibility, though voters do have short memories. Who can trust a party to cut tax (especially a tax and spend party) after they increased taxes over 100 times when in govt.

    But we can expect Labour to make some traction out of this, but how much is uncertain. As usual they have to win over the undecided middle class voters. I don’t know if they are onto a winner, but its a smart move on their part. National should never have presented them with this opportunity.

    With the economy still flat-lining and no improvement in employment in the foreseeable future, and the increasingly likelihood of a double-dip recession, National are leaving themselves open to criticism for not doing enough to improve people’s lives in these difficult times.

    Increasing GST is playing with fire in the current economic climate.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  41. Pete George (23,310 comments) says:

    And with the stuff about halves and sixteenths, they are not “substantially whole.”

    So half a pumpkin or half a melon would not be exempt? What about half a bunch of grapes? Podded peas? Would nuts have to be still in-shell?

    And if your biggest practical concern is about tax shenanigans

    Complicating tax law invites much more shenanigans. You have already illustrated how specific you have to be, a bit of cutting on this sort of product is ok, on another it’s not. Do you end up with regulations on each and every item of fruit and vegetable?

    The best way to avoid tax on fruit and vegetables is to grow your own. But that doesn’t involve the government.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  42. davidp (3,557 comments) says:

    >So half a pumpkin or half a melon would not be exempt? What about half a bunch of grapes? Podded peas? Would nuts have to be still in-shell?

    I can’t eat a whole lettuce. In fact I can’t even be bothered cutting up any part of a lettuce. I buy my salad mixed in bags. Why does Labour want to tax my salad? And why do they want to tax public transport… don’t they realise that it improves the environment and reduces respiratory disease?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  43. Rob Salmond (260 comments) says:

    Kudos to JohnG, Simon, Roflcopter, and dime for entirely vacuous comments. Thanks for playing.

    Certainly I agree with Pete that “the best way to avoid tax on fruit and vegetables is to grow your own” – but it does not follow that this should be the **only** way to avoid tax on fruit and vegetables.

    I think the shenanigan-based compliance costs of this proposal are being massively overestimated on this thread. If people can point to examples of peekaboo bras or size XXL business suits getting a VAT exemption in the UK for being children’s clothes, or postgraduate textbooks getting a children’s book exemption somewhere, then I would be prepared to reconsider on this front. But for now I’m happy trusting that the drafters can learn the lessons already learned in other countries in this area, and design a law that works as intended, and without overwhelming compliance costs.

    Interesting to note that nobody here appears to give much credence to DPF’s ridiculous slippery slope fantasy.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  44. Inventory2 (10,174 comments) says:

    Labour’s plans to exempt GST from fresh fruit and vege seem to have ALREADY hit a few snags, after just an hour of debate on Kiwiblog. Bring it on Cunners, bring it on!!!!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  45. bhudson (4,736 comments) says:

    Rob,

    How are doing with the Labour campaign to pump the lungs of the poor full of smoke to pay for fruit & veges for the wealthy? Is that the sort of govt you are looking for?

    People can try and obfuscate around the “consolidated fund” and general taxation all they like – Cunliffe’s own words were that $200m of additional tobacco tax would fund [only 80%] of this initiative. He requires continued levels of smoking to pay for it. Smoking is more prevlent among lower income earners. How can be be so stupid as to want to kill his voters?

    (Also his cred as a finance spokesman is somewhat further damaged by his words that $200m funding against $250m cost is basically a wash up. I would have thought $50m is quite a bit when you don’t have it. Perhaps he has enough investment income that $50m a year is a piffling amount to him.)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  46. RightNow (6,839 comments) says:

    I guess there will be some polling around what people think about the idea, and if it turns out to be popular National will probably adopt it anyway.

    plus ca change

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  47. Rob Salmond (260 comments) says:

    bhudson – My guess is that when Labour puts together a manifesto next year it will raise additional revenue through increasing the top tax rate (that has already been signaled in general terms) as a way of offsetting the fiscal impact of programs like this one. So it will balance out in the aggregate. As for the tobacco tax, I’m sure everyone would love to have the “problem” of no more tax revenue because everybody stopped smoking, but sadly that is unlikely. Cunliffe is simply using the revenue from an unfortunately prevalent unhealthy choice to try and promote a different healthy one. That seems reasonable to me.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  48. Pete George (23,310 comments) says:

    Rob, do you not think there would be any problems with other lobby groups trying much harder to get included on the GST exempt list? Do you really think a health product manufacturer, or a health food supplement manufacturer wouldn’t claim at least as much health benefit as fresh fruit and vegetable exemptions? What about something with obvious health benefits like olive oil? Shouldn’t that be encouraged?

    If things go according to plan (via tax pressure) and people eat more healthy fruit and vegetables and smoke less then the gap between 200 and 250 will surely keep widening.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  49. YesWeDid (1,041 comments) says:

    Yes it’s pretty clear that if the GST on fruit and vegetables was removed the entire foundation of our tax system would collapse and we would have anarchy.

    Maybe Labour could start by taking the GST off rates which is a tax on a tax.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  50. bhudson (4,736 comments) says:

    Rob,

    Great – so you have no problem with Cunliffe creating a situation where the “unfortunately prevalent unhealthy choice” must be maintained at higher than desired [by the rest of us, not him obviously] levels in order to fund his spending elsewhere? In other words, you are ok with him sustaining unhealthy practise in order to made fruit cheaper?

    So do you also think it a good thing that therefore the poor subsidise the cost of food for the wealthy?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  51. first time caller (384 comments) says:

    What about loose lettuce leaves, say washed rocket? mesculan salad leaves?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  52. JiveKitty (869 comments) says:

    I wrote about this months ago when it was suggested GST be removed from more than fruit and vegetables but it’s still valid:

    “This sounds absolutely wonderful[/sarcasm], but there are some huge problems with such an idea which mean it should not be implemented. The first problem is that there is no firm consensus on what constitutes healthy food, even if to make it more workable the GST was only removed from fresh fruit and vegetables (as suggested by Phil Goff in the article [http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10658652]). The second problem is that New Zealand has the cleanest GST in the world and complicating it would be distortionary without surety of benefit exceeding the distortionary impact. As such, removing GST from certain goods or services, be they healthy food or otherwise is an abysmal idea.

    On the first point, there really is no firm consensus on what constitutes healthy food. Recent science research, for example, suggests that wheat, particularly refined is a big problem but even less refined products as well, while fat is not necessarily so – except for trans fats, and yes, that implies that saturated fats are more okay than is generally thought, yet guidelines are not updated and revised in line with this because of the entrenchment and unthinking acceptance of “common knowledge”. As well as this, there is another significant problem in that there are studies, such as the China study, which appear to cherry-pick data in order to further a certain perspective. In a general sense, what is healthy is not particularly clear cut.

    Furthermore, even when apparently bypassing the controversy as to what constitutes healthy food just by removing GST from fresh fruit and vegetables (because all fruit and vegetables are healthy, right?) there are still significant problems. Firstly, what consitutes fresh is potentially an issue: Do cold stored fruit and vegetables that supermarkets keep and then sell when out of season count as fresh? Is a fruit or vegetable that’s had to travel for days to get to the country still counted as fresh even though something snap frozen might effectively be fresher? Secondly, there are also problems with how healthy fruit and vegetables actually are: Bananas, for example, are a great source of potassium, but have a relatively high glycemic index. Are they “healthy”? It depends what measures one is using – they definitely give a sugar spike. Carrots, pre-cooking, have a low glycemic index and good nutritional content, as do potatoes. Post-cooking, however, much of the nutritional value of both is lost. Given this, even when attempting to bypass controversy by only removing GST from fruit and vegetables, there would be significant problems.

    Moving on from problems with definitions, economically, this proposal in its form is moronic. Firstly, in its present form there is no guarantee that people would buy the correct composition of “healthy” foods for their dietary needs. People may end up not buying more vegetables but more bread and chicken instead. Secondly, even in its amended form, there are still similar problems given the above considerations about the actual healthiness of all fruit and vegetables (and still potential problems in terms of how the income and substitution effects interact with each other). The government still cannot really encourage the appropriate dietary composition by taking GST off certain “healthy” foods or even just fruit and vegetables. It is a poor method of targeting and it would likely be very distortionary.

    As well as this, at present, the government is running a deficit and is projected to do so for quite a while yet. Their revenue inflows do not exceed their outgoings. As such, not taxing such essentials is an economically retarded proposition. To do so would take away the significant benefits of a broad-based low percentage tax with fewer and less significant distortionary effects (essentials are relatively inflexible, thus distortion is less likely – this is also contributed to by relatively low percentage) while offering nebulous benefits.

    Given that “removing GST from the food specified in the bill would mean the loss of about $330 million a year in tax revenue” and the government is running a deficit, there would likely have to be some form of compensation in the government budget (further distortion). As there are not many viable broad-based taxes in NZ that are not already in place, a narrow-based high percentage tax (which is unlikely to be anywhere near as effective – due to the base and probable greater ease of avoidance – while also likely being more distortionary) would be one option. Another would be further cuts to government services (which are probably not all that possible in the short-term given a lot of short-to-medium term spending will have been allocated). The final option would be an increased deficit (which would open a whole other kettle of fish with a likely credit downgrade meaning increased interest rates leading to greater percentage of government revenue going to debt-servicing). Some combination of the above would likely have to be undertaken, and such policy around that area is yet to be seen from those proposing the idiotic changes to GST suggesting they are being reactionary and either do not understand the concept of time value of money given limited resources (money used now will not be available in the future) which is worrying given these are members of the country’s government or they are being fundamentally dishonest and promoting this to gain short-term political brownie points.

    Finally, the question as to when the GST would be removed needs to be considered. As the economy is already in recovery (admittedly with an expected lag in employment statistics), by the time the policy was actually implemented, it would likely no longer be “needed”. As such, when considering the likely time of implementation, it is clearly shown that this idea is a reactionary and populist measure which would likely be of little help in the short-term and which would probably be detrimental in the long-term.

    Removing GST from “healthy” food in New Zealand is a terrible idea. It would be exceedingly distortionary (costly) – wrecking the cleanest GST in the world – and offer only nebulous benefits at best. It is an idea proposed for reasons of political expedience, because of economic illiteracy, or both. Such an idea being seriously considered does not bode well for the governance of the nation.”

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  53. backster (2,122 comments) says:

    It does seem a silly socialist ideal which will increase bureaucracy and involve extra eternal pedantic legal costs before a judicial system of dubious rationality.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  54. Spam (596 comments) says:

    I think the shenanigan-based compliance costs of this proposal are being massively overestimated on this thread.

    As an analogy, there was a recent case in Australia that hinged on whether a type of “cracker” was actually a biscuit or a bread. Biscuits attract GST, Bread does not. These things do happen.

    The prepared salad thing clearly would not be GST free, as “a few loose lettuce leaves” is a substantial alteration from “a whole lettuce.”

    Right. So its not about “healthy” food at all. Clearly.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  55. mistywindow (27 comments) says:

    Breathtaking stupidity. More about why exemptions are mindless stupidity : here. Our political system is broken beyond repair. Both major parties are driven by short term expediency. We’re all hostage to special interest groups: beneficiaries, farmers, wrinklies like myself, students, the unemployed… I had hope that John Key had a cunning plan but he’s just like the rest of the buggers.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  56. tankyman (120 comments) says:

    Forget the easy bit of no GST on fruit / veges – the bit that scare me is “as higher GST on other goods is imposed” – given that the need the greens we are going to find ourselves paying 30% gst on cars, 25% on consumer electrical goods, etc.

    I.E. Take DPF’s old “Greens want to ban list” and in palce of banning it – they simply price them outside what NZ’sers can afford.

    Seriously bad idea.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  57. Monty (966 comments) says:

    so when Labour loase the 2011 election (it could be taken as read given the latest 54% vs 32% Poll) does this mean that Labour will acknowldge that this policy is rejected and then they will commit a flip-flop and instead come up with an equally nutty and dis-functional policy for 2014?

    Goff / Mallard / Cunliffe – we know you read this blog – you are fucking idiots for mucking around with GST. Go back and invent some real policy that is not popularist and reactionary to your dismal performance in the polls.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  58. Jcw (98 comments) says:

    I don’t buy your slippery slope argument Farrar – as always it is a form of fallacy. It is simply not inevitable that more exemptions will result following one exemption.

    I however do not support removing GST on fruit and vegetables – for the simple reason that the costs outweight the benefits.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  59. James Stephenson (2,088 comments) says:

    I don’t buy your slippery slope argument Farrar – as always it is a form of fallacy.

    You don’t? Maybe DPF chose the wrong examples. I’ll make a prediction that if GST comes off “fresh fruit and vegetables” it’ll take very little time for there to be lobbying for it to extend to milk, and then we’re straight into the compliance problem because as soon as you add extra vitamins or calcium to milk, to make it *more* healthy it would attract GST (notice that stuff in the yellow-topped carton isn’t actually called “milk”?).

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  60. mattyroo (1,006 comments) says:

    Rob the knob states:

    My guess is that when Labour puts together a manifesto next year it will raise additional revenue through increasing the top tax rate…..

    So, Rob, why are Labour not trumpeting this as a means to pay for removal of GST????

    You know perfectly well, raising the top income tax rate is going to go down like a bucket of cold puke, especially in the week Kiwis are finally about to be allowed to keep some of their own money.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  61. Pete George (23,310 comments) says:

    You have to look at the GST proposal for what it is – it’s like Act proposing a flat tax, or the Greens proposing any number of idealistic things that will never happen.

    Labour are trying to capture some of the vote so they recover some of their position, they know it’s most unlikely they could actually impose an extra tobacco tax on the lower socio-economic group that is the biggest consumer to finance more of a tax break to the middle and upper groups who are likely to be eating more fresh produce.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  62. cabbage (455 comments) says:

    I can’t eat a whole lettuce. In fact I can’t even be bothered cutting up any part of a lettuce. I buy my salad mixed in bags. Why does Labour want to tax my salad?

    I dont know about Labour, but i want to tax you for being so fucking Lazy.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  63. David in Chch (512 comments) says:

    I have an appointment at 11 am, so will make a quick post. Scanning these entries, I do not see the point made over at Dim-Post that the _variations_ in the prices of fruit and vege far exceed the GST component. So the argument that removing GST will encourage people to east more fruit and vege is simply bullshit.

    Also, Rob S says that it won’t be complicated, that the argument from the law student is not correct. Well, all we have to do is look at the Australian example to see that in fact the law student _is_ correct – this policy is empty and will give lawyers much more work and bring nothing to the “average” kiwi.

    As an example, there was recently an argument in Oz about potato chips vs biscuits. One is exempt from GST, the other not. (I forget which – not really important which.) Pringles are made using a potato dough. So they are arguing that their product should be exempt, EITHER because it is a chip (and other chips are exempt) OR because it is a biscuit (thus giving them a market advantage).

    The major points against are (1) it’s the thin edge of the wedge, and (2) the arguments about what’s covered and what’s not will give many lawyers much work for little benefit to us, the consumers and taxpayers.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  64. davidp (3,557 comments) says:

    Cabbage… It isn’t the 1800s any more. You might want to wash your clothes down at the village well using a block of soap and plenty of muscle power but I’ll just throw my clothes in the washing machine, thanks. I’ll also use my dishwasher. I’ll vacuum rather than give the house a good brooming, and I look forward to buying a vacuuming robot. I buy my food in the supermarket rather than spending my days toiling in the fields like my peasant ancestors. And I’ll buy salad pre-mixed and washed in a plastic bag.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  65. Archer (188 comments) says:

    I live rurally in quite a remote location so buy a lot of pre-frozen or tinned fruit and vegetables when I do my fortnightly grocery shop. They’ll either need to exempt pre-frozen and tinned fruit/veg, or make sure only people that can access fresh fruit/veg shops pay the 250mill shortfall that this policy costs – otherwise they are punishing rural NZ.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  66. francis (712 comments) says:

    There’s also the question about where in the chain from production to consumption the GST exemption is imposed. After all, it’s not purely a consumption tax.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  67. YesWeDid (1,041 comments) says:

    ‘Otherwise they are punishing rural NZ’

    Don’t rural NZ grow stuff? Rural NZ are punishing us urban Kiwis because you have all the land to grow stuff and we don’t.

    davidp – there is a difference between using labour saving devices and just being lazy.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  68. Pete George (23,310 comments) says:

    Most rural people don’t have a whole range of fresh produce available nearby every day, especially those living in the south (in winter especially).

    Something that is canned or dried or frozen is more important for health and nutrition than fresh is in the winter when a range of fresh produce is not as available.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  69. bchapman (649 comments) says:

    There is at least half a dozen good reasons to do this. The main objection seems to be- ‘Its too hard- we can’t be bothered’.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  70. JiveKitty (869 comments) says:

    @bchapman: Not when considering the cost. The benefits, as has been stated, are nebulous at best while the costs are significant and not at all nebulous. This is poor, nigh on economically illiterate policy.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  71. Kimble (4,408 comments) says:

    Pete George wins!

    Flawless Victory!

    Hey Rob, insert coin and try again. Maybe this time round you could explain why there would be GST on birthday candles, but not on the carrots in a carrot cake, and there would be GST on the sugar, but not if you are using raw sugar cane, unless you buy the cake rather than make it yourself, of course.

    How about gym memberships? GST on those? Going to the gym is healthy, but only up to a point, after that it becomes indulgence, so the GST would have to only apply to a certain number of gym visits, but that number would have to be different depending on you age, sex, and weight.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  72. alex Masterley (1,498 comments) says:

    “..economically illiterate policy.”
    I like that.
    Removing gst from fresh veges and fruit won’t affect people whose idea of a healty feed is a pie, packet of chips and fizzy drink.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  73. questlove (242 comments) says:

    Good point Alex. When it comes to assessing the cost vs benefit of removing GST on fruit and vegetables it needs to be determined if it actually would have a significant health benefit or not. Sure the savings in the health system could potentially be worth it long-term . . . if unhealthy eating is more a cost issue than a inherent lifestyle issue.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  74. freedom101 (481 comments) says:

    This is a policy which everyone who studies it closely knows is a load of crock. For the last 25 years both political parties have recognised that while it might be popular, it is totally irresponsible to do it.

    Labour has now broken ranks and is going to promote a policy which they know themselves is crock.

    It’s a sad day for NZ.

    Add to this the reinstatement of the “rich prick” tax and you have a populist government in waiting that is openly prepared to damage the country’s economy in a cynical pitch for votes.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  75. djg (72 comments) says:

    How will the apple grower recover all the gst he has paid in growing the product if he is not able to collect gst on the sale?

    How will the retailer be required to display his pricing, currently a price is deemed to be gst inclusive unless specifically excluded?

    Have Labour stated what the compliance costs will be?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  76. JohnG (22 comments) says:

    My apologies to Rob S (9.36), I really did think your original post was a windup, so to that extent I guess I was stupid, but my comment at 9.14 was genuine (well, apart from the lawyer bit). The raison d’etre for GST is its universality. And it’s a progressive tax rather than regressive – those who spend more pay more – allowing for lower income tax rates. Presumably that was the thinking when it was introduced back in 1987.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  77. labrator (1,846 comments) says:

    This policy could have the reverse effect if you look at the Standard Accounting Model the Australians need. If you’re a small shop/dairy owner, what’s easier? a) Run a shop where you don’t have to worry about accounting models (ie don’t sell fresh fruit) and just use the calculator or b) Pay your accountant to deal with the 1 basket of apples and bananas that no one really buys and the standard accounting model you need to use to work out how much GST you need to pay.

    I like how in the Australian model, you’re not just a shop anymore you’re one of:Fresh fish retailers, Cake shops, Hot bread shops, “Convenience stores that prepare takeaway food but do NOT sell fuel or alcohol”, “Convenience stores that do NOT prepare takeaway food and do NOT sell fuel or alcohol”

    An army of civil servants that will cost more in general tax than people will save will be required. The beauty of GST is its simplicity, destroy it at your peril. When GST exemptions were first thrown around in the “financial crisis” I remember seeing a petition going around which wanted bicycle sales GST exempt as they were a healthy transport mode. In fact, here is the FaceBook group for the Cog project.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  78. Pete George (23,310 comments) says:

    Labour have realised their proposed GST exemption for healthy fresh foods has a possible unintended consequence – one of the biggest food/health related issues we have is obesity, and making food cheaper could encourage people to eat more and become more obese.

    Labour are proposing a simple amendment to prevent this anomaly – a Not Working For Fruit And Veg policy. GST will still be paid on fresh produce, it will go into a Fruit and Veg fund. From this everyone on a benefit will be paid a Fruit and Veg benefit top-up – those receiving benefits are too poor to buy too much food so it will go to those who deserve it. Those who don’t receive benefits won’t need this as their wallets and stomachs are too fat anyway.

    This should pay for itself – through reduced health costs, and for those who spend the money on cigarettes instead of fruit and vegies that will increase the tax take on tobacco. Win-win.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  79. Rob Salmond (260 comments) says:

    Pete – I’m sure that there would be folk who *try* to get all manner of things exempted using fresh fruit and veges as a precedent. But governments need not accede to these demands, especially if they are expensive. Indeed the empirics suggest that western governments are well practiced at being selective in this area. An inability to do all good things is a pretty lame excuse not to do any good things.

    bhudson – I disagree with your assertion that keeping smoking rates artificially high is necessary for this policy to become funded. Sadly, their natural levels will provide enough revenue to allow this GST change unless you make the tobacco tax so high as to constitute a de facto ban, which would be inhumane. And I disagree with your assertion about the poor subsidizing the rich. The HES survey in 2007 showed that lowest decile households spent 2.6% of their income on fruit and vegetables, while highest decile households spent only 1.6% on the same goods. Data are available through Stats New Zealand’s table builder. And (also in reply to Pete) if fruit and veg consumption does go up and smoking does go down such that this policy is harder to fund using David Cunliffe’s current accounting, the resulting public health savings would likely be pretty helpful.

    People Who Brought Up the Australian Example – The definition of “fresh fruit and vegetables” is far less problematic than the fuzzy “basic food” line the Australian government has attempted to define. We have learned that lesson. Interestingly, Australia has an exemption for “fruit and vegetables” as part of their scheme, so if there are examples of protracted legal battles over that particular definition I would like to hear about them. Protracted battles over other definitions aren’t as relevant.

    Kimble – You suggested: “Maybe this time round you could explain why there would be GST on birthday candles, but not on the carrots in a carrot cake, and there would be GST on the sugar, but not if you are using raw sugar cane, unless you buy the cake rather than make it yourself, of course. How about gym memberships? GST on those? Going to the gym is healthy, but only up to a point, after that it becomes indulgence, so the GST would have to only apply to a certain number of gym visits, but that number would have to be different depending on you age, sex, and weight.”

    The answer is the same to all your questions, Kimble. Carrot cake, sugar cane, and gym memberships are all not fresh fruits or vegetables, and therefore would attract GST. That should have been fairly obvious to you, unless I have massively overestimated your intelligence.

    Folk who believe that exemptions are “economically lliterate” or “undercuts the very reason for a GST” – I suggest you study the consumption tax practice of other advanced democracies, almost all of whom have exemptions, none of whose civilizations have crumbled under the weight of the compliance costs, and many of whom you quote as good guides for New Zealand economic practice in other areas. Are you really willing to stand up and say that *all* of those governments do not understand the reasons for consumption tax as well as you do, are less economically literate than you, etc?

    JohnG – I accept your apology. And a tax is only “progressive” with respect to income if higher income folk pay more tax as a percentage of their income (check Wikipedia and all the authorities it cites for verification). In New Zealand, richer folk pay less GST as a percentage of their income, even though they pay more nominal dollars, making it a regressive tax with respect to income, and a flat tax with respect to consumption. It is not a progressive tax by any measure. The Tax Working Group has a paper on this if you are interested.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  80. labrator (1,846 comments) says:

    Rob Salmond wrote

    But governments need not accede to these demands, especially if they are expensive.

    But here you are explaining away why Labour should accede to this demand because, well just because. This is exactly what we’re trying to avoid, the politicisation of GST.

    Removing GST on things would be great for Labour as it’s another vote buying tactic they can use. Student loans all over again.

    …none of whose civilizations have crumbled under the weight of the compliance costs…

    Yeah, let’s increase bureaucracy because other countries haven’t collapsed. Next you’ll be advocating the USA’s foreign policy model, or Venezula’s form of government, or Cuba’s property rights because “their civilisation hasn’t crumbled”. If your measure of success is a civilisation “not crumbling” then you can see why I’m disappointed in the bar that Labour is setting.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  81. Inventory2 (10,174 comments) says:

    I can only surmise that Goff and Cunliffe see this as a job-creation measure. The staff od IRD would bneed to be tripled to administer this nightmare :-)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  82. first time caller (384 comments) says:

    But what about lettuce leaves? The ones out of the loose leaf section that you put into supermarket provided bags? Would that be exempt but the pre packed into store, ready washed be inclusive?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  83. Pete George (23,310 comments) says:

    Rob Salmond : I’m sure that there would be folk who *try* to get all manner of things exempted using fresh fruit and veges as a precedent. But governments need not accede to these demands

    Governments also need not accede to the demands of the fresh fruit and vegetable lobby demands. If they do there will be more and stronger demands from other groups.

    Is there any research available on:
    - how much increase would be expected to fresh produce consumption?
    - how much of this would be additional consumption?
    - how much of a reduction is expected in GST rated foods?
    - how much less GST would be recovered due to reduced consumption of GST rated foods?

    Has any other country changed from a comprehensive GST system to one with a similar produce category exemption like the proposed fresh produce exemption?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  84. JiveKitty (869 comments) says:

    I suggest you study economics, Rob. This is an economically illiterate policy which is unlikely to have the benefits that one intuitively assumes it will have (i.e. there are counterintuitive factors at play here), while it will have large costs. Governments have many factors in policy decisions. I suspect those making exemptions will have done so not because the economics was good but because of those other factors. NZ’s GST is the cleanest in the world. Let’s keep it that way.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  85. labrator (1,846 comments) says:

    @pete george 1.20pm “Not Working For Fruit And Veg policy”, gold, absolute gold.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  86. alex Masterley (1,498 comments) says:

    This isn’t really a vote catcher for Labour. For that to happen GST would have to be taken off KFC.
    Just read Mr Goffs statement about the policy. He makes a comment about rent being zero rated. WTF? My landlord charges me GST on the rent i pay, and i charge my subtennant rent. Rent ain’t zero-rated.
    If he can’t get that right what hope has he got?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  87. Rob Salmond (260 comments) says:

    Pete and labrator – Your objection on the basis of future demands is spurious. It says “if there are ten good things to be done, you can only afford one of them, and it is not 100% crystal clear which one is by far the best, then you should do none of them.” I don’t subscribe to that point of view. I would rather risk making a small mistake of selection and do one good thing than resign myself to a large mistake by doing none.

    Pete – Here is a report some empirical New Zealand evidence on a closely related question (GST off “healthy food”): http://tvnz.co.nz/national-news/gst-free-food-promotes-healthy-eating-3642180 And almost all OECD countries’ food exemptions are not for restaurant / pre-prepared food, and therefore they have had to deal with tricky issues about roast chickens in sitting in supermarkets, in-store wine bars, pre-made sandwiches, etc. There is plenty of case law which New Zealand can draw on.

    Alex – Your landlord is ripping you off. See here for example: http://www.nz-immigration.co.nz/business/business-tax.html And the tenancy tribunal’s website is here: http://www.dbh.govt.nz/tenancy-tribunal I just saved you 15% of your rent. All part of the service.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  88. krazykiwi (9,189 comments) says:

    Has any other country changed from a comprehensive GST system to one with a similar produce category exemption like the proposed fresh produce exemption?

    That’s a good question. I suspect the anwser is no, with some countries having used lobby-group favoured exepmtions to first get an unpopular consumption tax passed into law.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  89. nickb (3,675 comments) says:

    Exempting anything from GST would be an absolute disaster and administrative nightmare. Moreso if fringe loonies in the Greens get it taken off “healthy food”.

    More compliance costs for business, more staff at IRD, many retailers leaving prices at pre-reduction costs to pocket the extra, etc.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  90. JohnG (22 comments) says:

    @alex(2.07). Only residential rents are zero rated, so I presume you’re talking about rents on commercial property, which are not zero rated. If you’re charging your (commercial) sub-tenant GST then you must be registered for GST and will also be claiming back the input tax from your landlord. So it’s tax-neutral from a GST perspective.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  91. Pete George (23,310 comments) says:

    I’ve seen more detail on that research Rob – “a 12.5% drop in price increased people’s consumption of healthy food by 11%”, as I recall, also showed that the other foods consumption didn’t drop anywhere near as much. That meant people were buying more “healthy food” and all virtually their previous food as well, so they ended up eating more. That’s not healthy for most of us.

    Also from your link”
    “He said taking GST off food makes sense intuitively but it is actually very hard to do.”
    “There are a range of mechanisms we could look at to try and incentivise healthy eating at a cheaper price.”

    From my own experience we normally only buy and consume a certain amount of vegetables, fresh, canned, frozen.
    Fruit is different, it is often over and above our normal food requirements, basically it is more like a discretionary treat type of item. I doubt taking GST off fresh produce would change our shopping patters much if at all.

    Fresh produce can actually encourage you to eat more, and results in wasting more as well. If I have fresh produce I will eat it to use it up before it “goes off”. And if it does “go off” them I throw it away. Frozen produce is used as required with no pressure to over-use and less waste.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  92. Dazzaman (1,131 comments) says:

    GST…good grief, people are praising a tax? Wonders never cease. As others have mentioned already though, at least it’s pretty straightforward in its application in comparison to other taxes.

    The across the board raise in GST isn’t good, anyone answer that for me? But on the other hand it wouldn’t matter too much if it were coupled with a drastic cut in PAYE which is an iniquitous piece of daylight robbery.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  93. bhudson (4,736 comments) says:

    Rob,

    With respect to the $250m – It still has to come from somewhere. Cunliffe has proposed tobacco tax (directly). If he wises up to how heinous that is (or if smoking rates drop to a larger extent – which is a good thing), then the money still has to come from somewhere:

    - new taxes (not generally a vote winner)
    - reversing income tax rate reductions (again, not a vote winner and, even if it was done, Labour would be under enormous pressure to reduce GST back to 12.5% as a consequence, rather than trying to retain that to fund a complete removal of GST on fruit & veges – it would help this particluar area only minimally
    - increasing other existing taxes (still not a great vote winner, unless it is a tax which can be conclusively proven to only hurt the ‘rich bastards’ – unlike the tobacco and booze taxes)

    Or….

    i. Cut govt services (to retain current total spending while flowing $ into the fruit & vege exemption funding)
    ii. Borrow more (not an uncommon approach for them admittedly)

    Neither of these are great options either.

    As for the attempted rebuttal of the poor subsidising the cost of fruit & veges for the wealthy under Cunliffe’s tobacoo funding of fruit & vege GST exemption, you don’t respond to the actual point made. If tobacco taxes are being used to fund the GST exemption, given that lower income earners are more likely to be smokers, they are subsidising the cost of the fruit & veges for all non-smokers (which includes the wealthy.)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  94. alex Masterley (1,498 comments) says:

    Er Rob, It’s a commercial lease. They aren’t zero rated. Perhaps Mr Goff should be more precise in his language.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  95. alex Masterley (1,498 comments) says:

    JohnG, I know that. My business,i.e me is registered for GST.
    Tax neutral is entirely different to beast to zero rating.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  96. labrator (1,846 comments) says:

    @rob salmond

    It says “if there are ten good things to be done, you can only afford one of them, and it is not 100% crystal clear which one is by far the best, then you should do none of them.” I don’t subscribe to that point of view.

    There is only one good thing to do not ten and that is to not politicise GST. You’re singing the praises of an unproven change on the basis that it might potentially make people eat slightly better. It might also make people fatter. On that basis, you’re willing to load small business owners with a bureaucratic nightmare with the potential for a whole raft of unintended consequences.

    Labour says it’s for productivity and the little guy, well this change is certainly not for the small business owner in NZ but that’s okay because we’re doing it under the mantle of “health” and it’ll only affect a some people whilst creating civil servant jobs and giving the allure of Labour being a feel good and healthy party. The danger is the precedent but you’re willing to play russian roulette with GST and in the long run, you may just end up costing everyone more for their food.

    If you’re trying to push our last remaining good OECD ranking down then this is a great start. Interestingly enough, the only country above us on this scale is Singapore, which also has a flat rate of GST.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  97. KevinH (1,152 comments) says:

    GST is neither fair or reasonable, it has a discriminatory effect on the poor and retired whose income is fixed.
    GST was originally designed to replace a complicated system of sales taxes that were often missapplied or not applied at all.The fixed rate was designed to do away with time wasting complex calculations and replace it with a fixed universal rate. In it’s day a fixed rate was reasonable but over time it’s discriminatory effect comes into play.
    The solution inevitably will be a return to the old system of graduated tax , for instance a 20% GST on foodstuffs would have serious consequences for the government, as would a 20% tax on industry and agriculture.
    So the pointy headed types need to factor in those scenario’s for the next 10 years.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  98. Rob Salmond (260 comments) says:

    krazykiwi / Pete – The answer to your question about international comparisons is probably “none” as you suspect, because almost no countries had a comprehensive consumption tax to begin with. So it is a question with an uninformative answer.

    Pete – Your take on that research could have merit, but depends on the relative shares of healthy vs other food. If they are about 50/50, then you are right. But my understanding is that healthy food was somewhat less than half of all spending in dollar terms, which calls your consulsion into doubt.

    bhudson – I think that a new top tax rate at $100k+ is a possibility, as Labour has signaled previously. That initiative also meets your proposed test for potential popularity in that it only affects high income people. In addition, decreased utilization of available health services also saves money, even as the service remains just as available. Those are the kinds of health savings people are talking about.

    As for your cross subsidy point, it is a smaller issue than you might think. The poorest decile of households spend 0.7% of their income on tobacco, while the richest decile of households spend 0.5% and the second richest decile of households spend 0.64%. I haven’t done the full calculation, but a situation where the poorest decile spend proportionately 1.6 times as much on fruit and veg compared to the richest decile and 1.4 times as much on tobacco should come out as pretty much a wash in distributional terms. It is less the poor subsidizing the rich than the unhealthy subsidizing the healthy. I’m OK with that.

    Alex says: “Perhaps Mr Goff should be more precise in his language.” That would make two of you.

    Labrator – Newsflash – All decisions about exemptions, including the decision not to exempt, are politicized. In having one GST rate, the government is foregoing the opportunity to promote, say, children’s literacy more than McDonalds. That is an intensely political decision.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  99. Hagues (711 comments) says:

    Man that Rob Salmond sure is a sucker for punishment coming back again and again just to have his ass handed to him over and over.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  100. Finn (1 comment) says:

    Good effort Rob – I agree with much of your sentiment around there not being endless court cases around what forms of lettuce will be GST exempt. I honestly think most businesses have better things to do with their time than go through the expense of litigating so that they can drop their prices to their customers by 15% when as soon as they win such a case their competitors will do exactly the same thing and any advantage will be lost.

    However I would note 2 things:

    1 – I think you too quickly dismissed DPF’s argument.
    In one of your earlier posts you noted ‘promoting good choices’ as one of a few legitimate goals for the tax system. I do struggle to see that eating healthily will be the only good choice a Labour government would support.

    Taking the GST off medicines when a few more votes are needed is not inconceivable. Maybe the slippery slope will not reach to school buses, but I do think this will not be the end of it and the costs will be more open ended than figure we are given now. Where is that money coming from? There is no free lunch, even if it is just a salad.

    2 – I may well be mistaken I this point but aren’t fruit and vegetable priced, like almost everything else, on a supply and demand principal?

    Won’t dropping 15% off them simply be temporary as the market corrects itself and the prices go back to where they are now (which is in theory where everyone is the supply chain makes the most money).

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  101. david (2,553 comments) says:

    Fresh fruit & vege & eggs and horse poo at roadside stalls is already “GST free” (although probably not officially). I have yet to be able to measure the difference in price as bearing any relationship to the pevailing GST rate at the nearest supermarket or garden centre.

    What the totally non-commercial Rob Salmond fails to realise is that the products he is trying to describe are invariably price-point sensitive. Quite apart from the fact that he bobs and weaves and ducks for the cover of “the drafters of the legislation will fix that”, several telling blows have been landed and his defence is now in tatters. But good on him for trying and for sticking to the script.

    Tonight’s strategy review will be looking for counter-talking-points and there is no doubt that the brains trust will come up with claims that are as far from the truth as the LP pamphlet on the GST increase.

    Have no fear though Rob, there is no way it will ever be implemented so feel free to propose and defend all the crazy and distortionary policies that can be dreamt up in an attempt to differentiate from the rational and considered policies of the current Government. By the time Labour regain the Treasury benches, the current crop of losers will be gone and a new leadership will be able to disown and discard those old unworkable policies.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  102. questlove (242 comments) says:

    Man that Rob Salmond sure is a sucker for punishment coming back again and again just to have his ass handed to him over and over.

    It could be worse, he could come back again and again just to wave his pom poms.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  103. Right of way is Way of Right (1,129 comments) says:

    So, in raw figures. Phil Goff states that this will reduce the IRD tax by about $200 million. I guess he’s not factoring in the cost of the army of beurocrats required to administer this nightmare of a system, but then they were never very good with figures, the Labour Party, trying to tell everyone that National was going to increase the GST componet on a $90.00 trolley of groceries by $13.00!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  104. bhudson (4,736 comments) says:

    Rob,

    Thank you for acknowledging that the [Labour-designated] wealthy can look forward to another good old fashioned pasting if the left get hold of the Treasury benches again.

    Interesting that you would dismiss the importance of not overburdening the poor here in favour of one or two apples. That would seem to be quite selective application of social conscience. Are the unhealthy poor less worthy somehow? The wealthy do not need your help to buy the odd orange. The poor could probably do with less qualified support from you and the Left in general.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  105. Rob Salmond (260 comments) says:

    david – Your point about price sensitivity of demand on these items is correct. Indeed, that is why the field experiment cited in today’s ODT shows that removing GST on this stuff will likely increase their consumption by about 11%. That is elastic demand at work.

    bhudson – Two points on the top tax rate thing. (1) IRD data say that $100k income is in the 97th percentile of the NZ income distribution. I think just about anyone will designate that as high-income. (2) Even if the new $100k plus rate is 40% (which I doubt it will be), it would still be the 6th lowest all-in rate among the 24 high-income OECD countries at an income level of NZD100k (ppp equivalent), and the second lowest all-in top tax rate among the same group. That is hardly “a good old fashioned pasting.” And on your other point, I prefer generally to support “the poor” through policies other than GST exemptions – this policy is about enabling a healthy choice more than it is about income redistribution. I am confident that Labour will propose other ways to help low income Kiwis closer to the election.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  106. lastmanstanding (1,240 comments) says:

    Sigh! As one who lived in the uk in the mid 1970s with 4 rates of VAT it was a nightmare and a rortat the same time. The rules where so complicated and open to interpretation the VATman was ripped off.

    As others have said once one item or group is exempted there will be valid calls for others The list will go on and on.

    Thats why Roger D was praised around the world in the mid 1980s for not giving in to the pressure groups.

    Goff is blowing smoke up his arsehole doing the last dance of the desparates.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  107. labrator (1,846 comments) says:

    Newsflash – All decisions about exemptions, including the decision not to exempt, are politicized. In having one GST rate, the government is foregoing the opportunity to promote, say, children’s literacy more than McDonalds. That is an intensely political decision.

    @rob salmond Stooping to sarcasm now, excellent. So what you’re saying is even when you make a decision to not discriminate you’re actually discriminating. Can you see the logic flaw there?

    So, to use your analogy, when I decide to not donate to a children’s literacy program, I’m actually contributing to children’s obesity.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  108. bhudson (4,736 comments) says:

    Rob,

    “I am confident that Labour will propose other ways to help low income Kiwis closer to the election.”

    Oh I’m sure they will! And students again perhaps?

    Just because income earners are gouged more in some other economies, that doesn’t mean we should adopt it. Unless you promote lemming-like behaviour of course.

    (Also I note you don’t provide any information or evidence on what expenses income earners in those countries might be able to claim.)

    If you think percentiles are so relevant to this discussion, then perhaps you would like to publicly exclaim just how much of the total personal income tax take those in the 97th percentile already contribute?

    At least you try to flog a LIVE horse

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  109. lastmanstanding (1,240 comments) says:

    just to add part of my job as a a CA was to apply to get my clients goods and services classified at the lowest rate. It was a game between us and Her Majestys Customs and Excise to find a new loophole that they then had to close.

    Not enough space here to share some of our novel approaches.

    And no it didnt add to the UKs GDP or productivity but it did provide me and thousands of others with a good earner.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  110. Bevan (3,965 comments) says:

    STONE THE FLAMING CROWS!!!!!!

    http://www.news.com.au/money/money-matters/readers-call-for-an-overhaul-of-the-gst/story-e6frfmd9-1225929755186?area=money

    Et Tu Rob.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  111. Kimble (4,408 comments) says:

    Rob (GST FREE) Salmond: “The answer is the same to all your questions, Kimble. Carrot cake, sugar cane, and gym memberships are all not fresh fruits or vegetables, and therefore would attract GST. That should have been fairly obvious to you, unless I have massively overestimated your intelligence.”

    The birthday candles and cake example is from a famous Australian political stuff up. A politician who lost an election on the back of not being able to succinctly describe the proposed GST system.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  112. bhudson (4,736 comments) says:

    Mr Goff said reducing GST back to 12.5 percent was not possible in the short term because it was funded for with borrowed money; “it’s very hard to unscramble the omelette”.

    So, what he is saying is that if he is relected he either won’t reverse the tax cuts or, if he does, he won’t drop GST back to 12.5%.

    (He is also saying, therefore, that frozen peas are 15% less beneficial for yor health.) Actually, does he really understand what he’s saying???

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  113. Tauhei Notts (1,645 comments) says:

    Does Phil Goff want to make fresh fruit and vegetables exempt from GST
    or
    does he want to make them zero rated.
    The difference is huge.
    But, if Phil commented upon residential housing being zero rated I think he knows as much about tax as I know about 18th century Maori literature.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote

Leave a Reply

You must be logged in to post a comment.