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Mixed, But Predictable, Response To Labour's GST Policy

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Fuseworks Media
Fuseworks Media
Bill English ... reform would cost $270m
Bill English ... reform would cost $270m

The formal announcement of Labour's much expected election policy of removing GST on fresh fruit and vegetables has been welcomed as relief for low income families, but opponents say it will make the tax system too complicated.

Labour leader Phil Goff launched the policy, part of his party'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, he said.

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

Finance Minister Bill English was quick to criticise the policy saying it was the beginning of a slippery slope.

"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.

Revenue Minister Peter Dunne said sabotaging the tax system was no way to address obesity.

He said Labour had staunchly defended the integrity of the GST system in the past.

"This is cynical politics masquerading as concern for public health, otherwise why has it taken them so long to come to this position."

Maxim Institute researcher Steve Thomas said a single GST rate on all goods was the clean system needed and introducing exemptions would create mess and complexities.

"(That) inevitable bumps up the amount of money wasted on administering the system", he said.

"Exempting fruit and vegetables from the GST system is also fairly arbitrary... why not exempt running shoes? Why not exempt doctors visits?"

However, the Council of Trade Unions and Public Health Association (PHA) said the move would be welcome relief for low income families.

PHA national executive officer Gay Keating said the cost of making healthy basics affordable was nothing compared to what taxpayers would have to pay to support people with obesity-associated diseases later.

"At a time when our health system is struggling to cope with demand, it is more important than ever that we do everything we can to reduce avoidable hospital admissions.

"Giving people more choice about what they put in their shopping trolleys will go a long way towards that."

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.


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