Listen to Deborah not Otago University

Newsroom has an article from two academics at Otago University supporting the removal of GST on food – something opposed by almost every tax expert alive. The article is labelled “expert opinion” and they support the Maori Party bill on the grounds of “we need to start somewhere”.

An actual tax expert is Labour’s spokesperson Deborah Russell who noted:

I just want to take the House through some numbers and some evidence on this, to explain why we think there are better ways to address the cost of living. So, back in 2018, in the midst of all its paperwork, the Tax Working Group did produce a background note on GST, and, in it, it very explicitly examined the possibility of taking GST off kai, and looked at some of the numbers. They estimated which households would get a benefit from it. Now, by the time that’s adjusted for food price inflation since 2018, there’s been about a 28 percent food price inflation. A decile 1 household—so that’s the lowest-wealth 10 percent of our households—would, in today’s terms, get maybe about $19 a week benefit from taking GST off kai; a decile 2 household would actually get $18 a week; and a decile 3 household would get $23 a week. That’s the kind of benefit that would flow to low-income households from taking GST off kai. But a decile 8 household would get $46 a week, and a decile 9 household would get $53, and a decile 10 household would get $68 a week. The benefits of this change would flow primarily to high-income households. That’s the evidence of the Tax Working Group in 2018.

So the “expert opinion” from Otago University is that we should reduce the cost of living for the lowest income households by $19 a week and the highest income households by $68 a week!

The actual fiscal cost of doing this, of taking GST off food, would be—again, in today’s terms—about $3.3 billion to $3.9 billion.

That’s a lot of money to only reduce costs for the lowest income households by $19 a week.