Removing food GST would be fruitful
OPINION: The political bickering over the cost of living has resulted in a small amount of temporary relief at the petrol pump, but consumers are still not getting any joy at the supermarket checkout. Unfortunately, the Commerce Commission final report on the supermarket industry has turned out to be a decidedly limp effort.
Subsequently, one old idea has been enjoying a revival on social media. Should the government take GST off fruit and vegetables? Back when Phil Goff was party leader, Labour briefly entertained the idea, but it quickly slipped off the radar. The supportive evidence has never gone away. Over 10 years ago, Professor Tony Blakely
(then of OtagoMedical School) released research findings that showed there would be clear and substantial health benefits if the government stopped slapping on a 15 per cent tax whenever people bought heathy fruit and vegetables.
That’s a key reason why other developed countries exempt fruit and vegetables from sales tax. Thanks to advances in supermarket checkout coding, the compliance costs of such exemptions would be negligible. Withaminimum of fuss, Woolworths could deploy similar coding in its Countdown, Fresh Choice and Woolworths outlets here in New Zealand to what it uses across the Tasman for exemption purposes on certain food items.
Yes, there would still be anomalies at the margins. However, these would not impose costs remotely comparable to the wider good that might be achieved. Other countries seem able to cope reasonably well with the anomalies.
As for the argument that fruit and vegetable exemptions would violate the purity of our GST system….How do these zealots rationalise the exemptions and conditional deductions that IRD routinelymakes elsewhere in the tax system? Only GST (allegedly) must remain sacrosanct.
Surely, that argument is the wrong way around. Buying food – an essential of life – arguably belongs at the front of the queue for tax exemptions, and ahead of the ability to write off a laundry list of business-related costs. True, there are bureaucratic costs in managing every sort of tax deductions and exemptions. But for some reason, the need to grant case-by-case deductions for business expenses goes largely unquestioned.
Would the supermarkets pass on the savings? That would be the beauty (and political advantage) of holding the supermarkets to account in a series of graduated steps. The new industry regulator recommended by the Commerce Commission could begin their work by treating the handling of the fruit and vegetables exemption as a test case of the chains’ willingness to act in good faith.
If the GST savings were NOT being handed on – and the onus could be put on the supermarkets to document that itwas – this would then give the government a stronger mandate to break up the duopoly, and perhaps require them to divest some (or all) of their own product lines.
Obvious gains await any political party that can credibly present itself as the champion of Kiwi households struggling against predatory pricing. Removing GST from fruit and vegetableswould, arguably, be a tangible way of responding to the cost of living crisis. And ‘‘crisis’’ as the Chinese have told us for centuries, can be just another word for ‘‘opportunity.’’