A stupid and unaffordable policy

July 21st, 2014 at 7:00 am by David Farrar

Stuff reports:

NZ First has announced a plan to remove from food, as part of several policies announced at its party conference.

This is incredibly stupid. Our GST is the envy of much of the world for its lack of exemptions. When you start doing exemptions, then you get gaming of the system. Does food include fast food? does it include pre-packaged meals? Does it include caviar? Does it include dining at top restaurants? Does it include drinks?

Peters said the policy was estimated to cost $3 billion a year, and would be funded by a clamp down on “tax evasion and the black economy”, which it estimated to cost $7 billion a year, and what Peters said was “drawing on the projected surplus of billions in the years ahead that result from running a sound economy”.

This is just intellectually dishonest. Basically this policy would blow the deficit out by $3 billion a year. There is no magic wand you can wave to locate and tax the black economy. The reality is that if you want a $3 billion a year tax cut, then you need a $3 billion a year spending cut.

 

Tags: ,

37 Responses to “A stupid and unaffordable policy”

  1. RRM (9,745 comments) says:

    There is no magic wand you can wave to locate and tax the black economy.

    Perhaps this is Winston’s way of coming out in favour of legalising marijuana? ;-)

    Vote: Thumb up 12 Thumb down 0 You need to be logged in to vote
  2. redqueen (547 comments) says:

    I thought Peters went to Hogwarts and was the owner of a magic wand shop…I mean, most of his announcements and ‘policies’ only make sense in that context…

    Vote: Thumb up 13 Thumb down 0 You need to be logged in to vote
  3. EAD (917 comments) says:

    “The reality is that if you want a $3 billion a year tax cut, then you need a $3 billion a year spending cut.”

    Does the same rule of thumb that you must match expenditure with revenue also apply to the National Party?

    If it did, then how come they have spent every single year of the last 6, running continued massive deficits which has seen our government debt explode to $83 billion? Yes, Eighty Three BILLION!

    When even an allegedly “right-wing” party with an absolute majority can’t get a grip of our public finances, there is only one direction the ship of state is heading which the below famous quote so eloquently puts it:

    “A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury.

    The average age of the world’s greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to complacency; From complacency to apathy; From apathy to dependence; From dependence back into bondage”

    When we have characters like KimDotCom in politics, when we have our leaders taking “selfies” and launching # campaigns and when we have the middle class on WFF welfare, it doesn’t take a rocket scientist to work out where we are on that continuum.

    Vote: Thumb up 7 Thumb down 11 You need to be logged in to vote
  4. OneTrack (2,959 comments) says:

    Which tax evasion is he talking about “clamping down on”, that IRD aren’t already tackling? How many more public servants is he talking about the achieve this? 3 billion dollars worth? if so, what is going to pay for the GST drop?

    Is Peters following in the Cunliffe’s lead of “policies”(sic) that haven’t been thought about for longer than a feel-good sound bite?

    Vote: Thumb up 10 Thumb down 0 You need to be logged in to vote
  5. Manolo (13,517 comments) says:

    Because the venal Peters said it, the blue rinse brigade will believe and swallow this crap. Mind boggling!

    Vote: Thumb up 13 Thumb down 0 You need to be logged in to vote
  6. Pete George (23,417 comments) says:

    Claiming they can fund policies by clamping down on ‘avoidance’ is an old trick. Labour are much more modest in their Fiscal Plan:

    Labour will set a target of reducing tax avoidance by $20 million a year in 2015/16, rising to $200 million a year in 2018/19.

    In contrast ACT have just announced a policy that would require ‘Honest for Taxpayers” by making Government equate the cost of policy to potential tax reductions.

    For example, the government should be keen to alert taxpayers that, without Working for Families:

    – the 17.5% income tax rate would be 12.5% OR
    – the 10.5% income tax rate would be 3.5%.

    The Minister for Tertiary Education should be keen to remind everyone that, if not for interest-free student loans

    – the 17.5% income tax rate be would 16% OR
    – the 28% company tax would be 25% OR
    – the 33% top income tax rate would be 30%.

    That’s sobering, but good luck with getting politicians to be upfront with what their handouts would cost in terms of tax.

    Act Policy – Honesty for Taxpayers (yeah, right)

    Vote: Thumb up 9 Thumb down 1 You need to be logged in to vote
  7. marleybob (8 comments) says:

    I do like his policy of removing GST on rates, and locking up drunks

    Vote: Thumb up 5 Thumb down 3 You need to be logged in to vote
  8. chris (609 comments) says:

    I’ll repost my comment from yesterday’s Winston post (although it appears they’re allowing all food to be GST free, not just fruit and veg):

    The problem with removing GST from fruit and veg is it assumes we pay exactly how much the fruit and veg costs plus a markup, and therefore removing the GST will decrease the price paid by the GST amount. In the real world, we pay however much the supermarkets think we are prepared to pay – why else are e.g. apples always $x.99 or $x.49 per kilo?

    If a government were ever stupid enough to remove GST on fruit and veg (and what a pandora’s box that would open up with the rules and exceptions required) I can almost guarantee we’d see an immediate 3/23 reduction in the price of fruit and veg, and about a month or so later the prices would be back up to where they were.

    The only winners would be the supermarkets making an increased markup.

    We the consumers and taxpayers would be the losers, because that tax would have to be found somewhere else, and we’d still be paying the same price for fruit and veg.

    Vote: Thumb up 14 Thumb down 0 You need to be logged in to vote
  9. OneTrack (2,959 comments) says:

    EAD – who alleges National are right-wing? More likely centre-left.

    Vote: Thumb up 8 Thumb down 2 You need to be logged in to vote
  10. Mark (1,465 comments) says:

    Long past time Winston was gone from National politics

    Vote: Thumb up 15 Thumb down 0 You need to be logged in to vote
  11. flipper (3,912 comments) says:

    Let us assume that winniepoo’s $3 billion GST tax cut is an accurate figure.

    Treasury and IRD both state that it costs between 18 and 22$s to collect and distribute every $100 in tax. On that basis winniepoo’s $3 billion costs $3.75 billion .

    The only thing certain about this load of peters bollocks is that the children of the MSM are too dumb to ask for calculations.
    Oh sheet…here I go treating winniepoo as if he was worth anything more than a backside wipe.

    Vote: Thumb up 8 Thumb down 0 You need to be logged in to vote
  12. JC (942 comments) says:

    Does anyone remember Winston’s stint as Treasurer back in the 90s when he cracked down on the so called Black Economy.. and the rash of suicides that followed by ordinary folk who got swept up in the tax man’s clutches?

    I don’t think you will find IRD too happy with a return to that policy. One way or another screwing an extra $3 billion from folk doesn’t really come from the Black Economy but from easier meat in the private sector. It sounds good but such crackdowns usually result in an *increase* in tax evasion.

    JC

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  13. duggledog (1,484 comments) says:

    Yep crazy old Winston BUT this will resonate with some parts of the electorate. No doubt about it. At the end of the day (yeah I know why) a 2 litre bottle of milk = $2 AUD at Coles; in NZ at say Foodtown… what would it be now, $4.50? $3.60? Price of milk National…

    Vote: Thumb up 1 Thumb down 4 You need to be logged in to vote
  14. Judith (8,526 comments) says:

    Retaining GST as it stands because it is the envy of the world for its lack of complications, is not a reason to keep it that way, if more can be achieved by changing it.

    Vote: Thumb up 1 Thumb down 21 You need to be logged in to vote
  15. chris (609 comments) says:

    @duggledog From my understanding, the Australian supermarkets use milk as a loss leader to get people in the door. Like I said, the price we pay for food does not necessarily reflect the cost.

    Vote: Thumb up 9 Thumb down 0 You need to be logged in to vote
  16. Nigel Kearney (958 comments) says:

    Why criticise him? When you do that, all his potential voters hear is his name followed by some stuff they don’t understand. Don’t rationally explain why his ideas won’t work, for the same reason you don’t rationally explain to a dog why it’s bad to crap on the carpet. Just never mention him at all. Please.

    Vote: Thumb up 8 Thumb down 0 You need to be logged in to vote
  17. oldpark (237 comments) says:

    Seems like the dance of the desperate or the bribe of the decade.Is bad enough the potential economy wreckers green/labour parties now a third,what price power of the masses,or just plain old baubles.

    Vote: Thumb up 7 Thumb down 0 You need to be logged in to vote
  18. shoreboy57 (137 comments) says:

    I’m sure the policy covers the Green Parrot

    Vote: Thumb up 6 Thumb down 0 You need to be logged in to vote
  19. burt (8,173 comments) says:

    I guess if Winston gets fined every time he appears in public he can pretty quickly claim he’s paid back the stolen $158,000.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  20. Alan (1,087 comments) says:

    So the global opinion of economic orthodoxy when it comes to our broad based GST system is important, but when those same experts criticise our lack of a capital gains tax they are idiots who should be ignored.

    This article is verging on parody.

    Vote: Thumb up 1 Thumb down 6 You need to be logged in to vote
  21. thedavincimode (6,606 comments) says:

    Retaining GST as it stands because it is the envy of the world for its lack of complications, is not a reason to keep it that way, if more can be achieved by changing it

    That’s quite right nursey. But the changes proposed by peters will not represent an improvement on the status quo which is the point. They would be a significant retrograde step.

    Vote: Thumb up 8 Thumb down 0 You need to be logged in to vote
  22. thedavincimode (6,606 comments) says:

    Alan

    Try to stop embarrassing yourself. There is no equivalence here. Suggesting that there is by describing this article as a parody is nothing more than ignorance. The food exemption and capital gains tax issues are separate debates with entirely different considerations.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  23. David Farrar (1,881 comments) says:

    I have an assumption that no NZ First voters or potential voters read this blog. Except Winston of course.

    Vote: Thumb up 10 Thumb down 0 You need to be logged in to vote
  24. SPC (5,531 comments) says:

    Most of the OECD exempts food from taxation and has a CGT.

    The people/voters of these OECD nations do not envy us the higher cost of food. Nor do they ask that the 1% who pay most of the CGT abroad become free of requirement to pay tax on their CG income.

    That said the $3B has to come from somewhere – applying GST on financial charges or a surcharge of 1% on mortgages would do that. A surcharge would have the advantage of allowing the OCR to go down to 2.5% rather than be increased to 3.5%.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  25. BlairM (2,310 comments) says:

    It’s not a stupid policy at all. Many countries and states operate with food exemptions on sales taxes. It only has to be as complicated as you want to make it. Food is pretty easy to define – it’s stuff you put in your mouth for nourishment. It’s not nearly as complicated as is made out.

    Ask yourself what is more important – the purity of taxation system, or the ability of poor people to provide nourishment for themselves without having to pay the government a tax?

    Why do we put a sales tax on the basic necessities of life? Why not just tax the “extras”? Ideally, if we have any tax at all, it should simply be a sales tax on these goods and services, while leaving food clothing shelter and income well alone.

    Vote: Thumb up 1 Thumb down 5 You need to be logged in to vote
  26. simian (29 comments) says:

    Um you say that our Gst is envied because it has no exemptions but you are wrong we have both exempt supplies and zero rated supplies already, but don’t let facts get in the way!

    Vote: Thumb up 1 Thumb down 1 You need to be logged in to vote
  27. David Garrett (6,905 comments) says:

    This is a good policy to campaign on…I don’t say it is a good policy, but it SOUNDS good to the hoi polloi…in fact at the risk of ridicule, I will admit it sounded an OK policy to me when it came up in 2009 until Roger explained why it was nonsense..

    I am not making my point very well…What I am saying is Key and his men are going to have to explain to the electorate why a policy which sounds like a real positive to “the poor” will not in fact help them…Just saying “Oh this is a rubbish policy” without more is risky…because it sounds good…

    I don’t think I’ve had enough sleep!!

    Vote: Thumb up 9 Thumb down 0 You need to be logged in to vote
  28. Alan (1,087 comments) says:

    No, there is a clear equivalence here.

    Firstly we laud these overseas experts who love our “pure” gst system yet we mock the same people when they support a broad cgt.

    Saying it’s not so doesn’t make it.

    Vote: Thumb up 0 Thumb down 1 You need to be logged in to vote
  29. chris (609 comments) says:

    @simian Yes, there are some exceptions (e.g. no GST on bank fees and the like, no GST on exports) but it’s nothing like in some other countries. From memory, the UK applies/exempts VAT on some items depending whether they are eaten at a cafe or bagged up to take away. And that’s just for starters: they have a whole raft of exemptions for this that and the other.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  30. chris (609 comments) says:

    @Alan maybe a CGT is a good idea. Maybe it isn’t. But it isn’t the magic bullet Labour seem to be making out that it is, that it will somehow stop the property market continually inflating. If it were so, property would be more “affordable” in Melbourne and Sydney than it is in Auckland. But it isn’t.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  31. Left Right and Centre (2,910 comments) says:

    chris – exactly. No problemo – Mein Winston will place a price ceiling on all the ‘healthy food options’. Too easy comrade. NEXT !!

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  32. Alan (1,087 comments) says:

    I make no comments on the gst removal or the cgt, i have no strong opinions on either subject. I guess like Bill English I’m broadly in favour of it as a concept.

    My point this morning was about the farcial doublespeak in the original post. International opinion is important and can be used to as justification as long as you agree with it, otherwise it can be safely ignored.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  33. Left Right and Centre (2,910 comments) says:

    DG – the bloody hoi polloi – oh dear. Oh dear oh dear. Oh no.

    If I start I’ll never stop. The irony and truth of the hoi polloi is that half of them wouldn’t for the life of them dare let a frickin vegetable near them even if promised a 100% cast-iron guaranteed ten minute continuous earth-shattering life-changing orgasmic nirvana by deft kama-sumetric manoeuvring with one of Ohakune’s finest up their sumo-sized jacksies.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  34. TJM (3 comments) says:

    Actually Alan, I think you’ll find that DPF has done a number of previous posts that were generally supportive of the concept of CGT – as long as there was a commensurate downwards adjustment of current taxes so that it wasn’t just an additional tax.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  35. Anthony (789 comments) says:

    I think you’ll find DPF is more in favour of a land tax like myself. A CGT that you might not pay until 20 years down the track has too little effect on behaviour and is grossly distorted by inflation! A land tax that hits landlords in the pocket from the start might make them think twice before buying an old dump for a high price and then claim they are helping tenants!

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  36. SPC (5,531 comments) says:

    A land tax is no different to higher rates – pensioners paying it?

    A tax on realised CG is fairer.

    And if a land tax was not a cost against rent income would lead to higher rents.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  37. thedavincimode (6,606 comments) says:

    A land tax that hits landlords in the pocket from the start might make them think twice before buying an old dump for a high price and then claim they are helping tenants!

    Yes indeed; far better that the old dump remains an old dump and is sold only to someone who is an owner occupier.

    What’s your view on the market distortion created by preferring other forms of investment over land – equities for example – which presumably would not be subject to “land tax”? How would you treat the family home?

    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.