National claims Labour plans to remove the 15 percent GST from fruit and vegetables if it gets back into government. Photo: 123rf
A think-tank economist says it would be cheaper for the government to offer a weekly universal payment than to remove GST from food.
National claims Labour plans to remove the 15 percent GST from fruit and vegetables if it gets back into government.
New Zealand Initiative chief economist Eric Crampton said the government could instead offer everyone a near $30 weekly payment - double what they would save on food if GST were removed.
"Removing GST from food is a pretty terrible idea. Any objective that you're trying to achieve by taking GST off of food is better achieved through other mechanisms that do less harm," Crampton said.
"The Tax Working Group in 2018 showed that for the same cost to government revenues as a whole in GST exempting food you could provide a universal transfer to every household in the country that would give twice as much money to poor people as the effect of taking GST off of food for them."
Campton said the possibility that removing GST could be tabled so close to an election is staggering.
"It's a deeply cynical move that is based on an expectation that people are too stupid to know better," he said.
Eric Crampton. Photo: Supplied
"If the government proceeds with it, it does so knowing that it is a terrible policy, that it has had advice against doing it and that other available policies that cost less to the government overall could do more good for the groups that the government is trying to help."
In the past year the price of fruit and vegetables has leaped 22 percent and overall food inflation has risen at its fastest rate since 1987 - when GST was brought in.
Consumer NZ head of research and advocacy Gemma Rasmussen said the supermarket sector had bigger problems to fix - given it was a duopoly making excessive profits.
"Consumer NZ is concerned about the lack of competition within the supermarkets. We have a duopoly, it's a highly concentrated market and the Commerce Commission market study did find that there were excessive profits.
"It's potentially one thing that you could throw in the mix that could help, but of course there are implications to that. Consumer NZ would like to see a functioning market where there's adequate competition - we think that would be a healthier thing for all New Zealanders."
Consumer has met with the country's first grocery commissioner, Pierre van Heerden, who began his five-year term this month.
