What people want is the GST off our food

22:18, Aug 16 2011

Funny how people who say they want lower taxes suddenly start sweating and spluttering when you say "yes, less tax on food".

This week, some people presented a petition to Parliament calling for no GST on food.

No party is going to remove GST from all food, but Labour has promised to take the GST off fresh fruit and vegetables.

That idea came from two new developments:

1. First, National increased the rate of GST. There's not the money to put GST back down to 12.5 per cent because the deficit is sucking our blood - unless of course we're going to put the top rate of income tax way back up. So instead of reducing the rate of GST, taking it off essentials is a good compromise.

You have to do something. Prices have skyrocketed since National increased GST last October, and grocery bills are still going up. Your promised compensation for the tax increase has long since gone but the bills are still coming in.

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2. The other development was a compelling discovery researchers made about how to get people to buy healthy food. The most effective thing you can do is to take GST off.

In a peer-reviewed study published in an international journal, Kiwi researchers found that taking GST off led shoppers to buy about half a kilo more fruits and vegetables per household each week.

Now that we have evidence about policy effectiveness, we can do one of two things: act on it, or ignore it.

If you are going to ignore the health advantages then you have to demonstrate a better way of addressing the healthy eating issue. So far no researcher has been able to. Some people suggest really bad policy like "give poor people vouchers" - that leads to high effective marginal tax rates, there's no research to show it works, and anyway, taking GST off fresh fruit and veg is not only about the poor.

The best thing about the policy is that everyone gets the same break.

The arguments against taking GST off food are thin.

If you are against it you have to consider at what rate of GST you would start to concede some exemption could be justified.

I doubt there is anyone who would support a GST of 20 per cent with no exceptions; that would be inhumane.

Thus, nearly every country with a GST higher than ours has some exemptions. Countries with a GST lower than ours tend not to have exemptions.

With a 15 per cent GST we are demonstrably at close to the tipping point.

Yes the purity of a flat rate is good, but it's not the whole enchilada.

We already have some exemptions, so it's not pure now: we don't put GST on secondhand goods, so a new house costs 15 per cent more than the identical house across the road that's a year old. We don't put the GST on financial transactions or rent. A typical business has to process these exceptions every two months and they seem to cope.

We exempt those things, we can exempt others.

Snowflakes should be pure. Tax policy should make people's lives better.

People who want to tax fruit and vegetables say it's complex to remove the gst because it's hard to tell what is covered by the tax and what's exempt.

Let me put this delicately: if you can't tell what a fruit or vegetable is, you really shouldn't be debating tax laws.

To clear things up: a lettuce? Fresh veg. An orange? Fresh fruit. Strawberry yoghurt? Not fruit. Potato salad? Not unprocessed. Beetroot sandwich? Not unprocessed, and definitely not cool.

It's not hard.

Ever notice how they say things that help families are too hard, but policies are necessary if expensive lobbyists are out there demanding them?

There no lobbyists being paid to remove GST from food. No one pestering MPs or donating to their campaigns.

Yet there is still one way it might happen: politicians listen very closely if people really want something.

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