Labour to axe GST on fruit, veges

Last updated 15:09 27/09/2010
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Removing GST from fresh fruit and vegetables is the first of Labour's election policies aimed at reducing the cost of living for low income families, leader Phil Goff says.

The policy, announced by Mr Goff in Porirua, north of Wellington, this morning, was part of Labour's campaign against the Government's tax package which takes effect on Friday and includes lifting GST from 12.5 percent to 15 percent.

Removing the GST on fresh fruit and vegetables would save the average family $6 a week, or $300-$400 a year, Mr Goff said.

Labour estimated the loss of tax revenue at around $250 million which could be met by increasing tax on tobacco.

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".

"This axing of the GST tax off fresh fruit and vegetables is one way that we can immediately alleviate some of the pressure that is going on families once we become government," Mr Goff said.

People were having to pay more for their electricity bills, rent, ACC levies, petrol, doctor fees and early childhood education, and yet the top 10 percent of high income earners would get 42 percent of the income tax cuts on Friday, he said.

"If you're living in this community and you happen to be in the bottom 20 percent do you know how much you get of the tax cuts? Two percent.

"When you tax consumption more you are hurting those that have to spend every dollar that they earn."

Removing the GST on fresh fruit and vegetables would also help reduce New Zealand's obesity problem by increasing the amount of fruit and vegetables people consume, Mr Goff said.

"The evidence shows that if you drop the price on those healthy foods people will eat more healthy foods."

Retailers would reduce their fruit and vegetable prices because of public attention and scrutiny by the consumer groups.

Fresh fruits and vegetables was an easy category that did not need defining because people knew what it meant, he said.

It would not include any thing processed such as frozen peas, fruit salads or sun-dried tomatoes.

Labour would make further announcements about focusing on growth in the clever economy, monetary policy that helps exporters, a skills policy, a savings policy and reducing power costs.

"This policy by itself is not going to change the world, it's going to help."

Another area Labour would look at was the dividends taken by government from electricity companies.

Finance Minister Bill English said removing the tax on fresh fruit and vegetables would put Labour on a slippery slope.

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"It's never going to end is it. It's fruit and vegetables today, frozen peas tomorrow... vegetables in hamburgers sold in McDonald's - that's healthy".

He said the policy would cost $270m and only save an average person $1 a week.

Professor Tony Blakely from the University of Otago said his research showed reducing the price of vegetables by 12.5 percent increased the amount of vegetables people bought by 11 percent.

"Maori, Pacific and low income shoppers might increase their purchasing of fresh fruit and vegetables more, in percentage terms, in response to a removal of GST," he said.

As low income earners also spend a high percentage of their wage on fruit and vegetables removing GST would reduce inequality.

Horticulture New Zealand also welcomed the announcement saying it would improve the national diet.

- NZPA

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