27 Sep 2010

English, Dunne rubbish Labour's new GST policy

8:30 pm on 27 September 2010

The Government says Labour's newly annnounced policy to remove GST from fresh fruit and vegetables is a gimmick that would complicate the tax system.

Labour says the policy would cut a typical family's food bill by $300 to $400 a year but Finance Minister Bill English says the saving works out to just $1 a week for the average New Zealander.

He says it's a muddled policy that would impose extra costs on retailers and create pressure for other GST exemptions.

Launching the policy in Porirua on Monday, Labour leader Phil Goff said many families will be worse off under the Government's tax changes taking effect on Friday, which include a rise in GST from 12.5% to 15%.

Mr Goff says removing GST from fresh fruit and vegetables will help people on low and middle incomes make up some of the ground they are losing under the National-led Government.

He says a typical family, which spends about $42 a week on fruit and vegetables, would save about $6 a week, or $300 to $400 a year.

Health systems savings foreseen

Labour estimates its policy would cost about $250 million in lost tax revenue, but Mr Goff says the fiscal cost will be repaid many times over in savings to the health system.

He says there would be a small one-off cost to retailers to implement the change.

He told a small audience it's the first of a series of policies Labour will release over the coming months aimed at helping families get ahead.

The Government says an average-income household will be $25 a week better off after the 1 October tax changes.

Imports would be exempt, says Dunne

Revenue Minister Peter Dunne also says Labour's policy would complicate the tax system.

Under such a policy, Mr Dunne says, peas and beans grown in Hawke's Bay and frozen by Watties would be subject to GST but apples imported from California would be exempt.

The minister says the current GST system works well and is simple, and having an exemption for fresh fruit and vegetables would be absurd.