14 Aug 2023

Labour's promise of GST off fruit and veg - what would be covered, what would not

5:21 am on 14 August 2023
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The determining factor for which products are covered, and which are not, is whether there has been any processing. Photo: RNZ / Richard Tindiller

One of Labour's big election promises is to take the 15 percent goods and services tax (GST) off fresh and frozen fruit and vegetables from April 2024, if re-elected.

That would mean savings of about $4 a week, on an average spend of $30 in the fruit and vegetable section.

The determining factor for which products are covered, and which are not, is whether there has been any processing; so the exemption would not apply to "canned and dried items, or to juices", according to the guidelines released with Labour's policy.

Reference to "zero-rated" means no GST applied.

"Processed in this context means cooked or combined with other ingredients.

"This rules out anything canned because of the heating process that accompanies canning. 'Processed' does not mean being cut up and wrapped without additives. This means that pre-prepared vegetables like fresh spinach in a bag would be zero-rated."

Frozen mixed vegetables would avoid GST, however "potatoes mashed into chips, coated in canola oil and then frozen would be excluded and would still attract GST".

A list was run past Labour leader Chris Hipkins at the weekend's policy launch.

Prime Minister Chris Hipkins

Labour leader Chris Hipkins. Photo: RNZ / Angus Dreaver

A fresh corn cob would be exempt, but not a can of corn - he said people would "still have that choice if it's cheaper".

Cut pineapple - "that's fresh and it's unprocessed" - would be included.

The jury was out on dried or semi-dried tomatoes. However "dried products are processed", Hipkins said.

Bags of mixed lettuce and mixed frozen peas and corn would be exempt.

Coleslaw, though, would be a different story if there was "value-added ... if it has mayonnaise added into it then it won't be covered".

A technical group would "make sure the technical details of this would be worked through before the 1st of April when it comes in," Hipkins said.

A newly established Grocery Commissioner would monitor supermarkets' pricing behaviour "to ensure retailers are passing on the full impact of the GST removal ... and will take action if it's not happening".

National offers tax cut alternative

The GST policy would cost the government about $2 billion over four years, made up in part by cancelling a Covid-related depreciation for commercial property owners.

Labour says it is a targeted way of easing the cost of living pressures and stacks up well against the National Party's tax plan.

"The current economic environment means now isn't the time for unfunded and inflationary tax cuts," Hipkins said.

"New Zealanders now have a clear choice in this election. Huge tax cuts for millionaires and CEOs under National, or relief at the checkout and support for working families under Labour."

Deputy leader of the National Party Nicola Willis

National Party finance spokesperson Nicola Willis. Photo: RNZ / Angus Dreaver

Hitting back, National said removing GST would do "very little to help families suffering through the cost of living crisis, but will have supermarket owners rubbing their hands with glee".

Finance spokesperson Nicola Willis said New Zealanders were "being smashed by a cost of living crisis that has dragged into its third year and the best Labour has to offer is a tax change worth less than a kumara".

"Labour are foolish to suggest supermarkets will pass all of this reduction on to shoppers," she said.

"National would cut out the middle-man - instead of passing tax cuts through the local Pak'nSave, we would put the relief direct into people's bank accounts with income tax reduction."

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