Letters to editor: Why we shouldn't exempt food from GST

Cutting GST on food is an inefficient way of helping those on a low income, writes Don Brash. Photo / Getty Images

In defence of GST

In his letter of March 8, Pete Dolden describes me as "an old-fashioned economist who thinks in terms of double-entry bookkeeping" in opposing exempting GST from food. He notes that Australia and the UK have been doing it for years, so why not us?

Yes, lots of countries exempt food from GST. There's nothing stopping us doing the same except for three things.

First, GST is not like a sales tax: it's levied at every stage of production, so it's much more complicated for small businesses to work a GST system when there are exemptions. Minimising compliance costs argues for no exemptions.

Second, if food is exempt, why not lots of other items, such as books and doctor's bills?

In no time, the GST system is not only vastly more complex but also has to be levied at a higher rate because of the loss of revenue caused by exempting some items.

Third, exempting food is a very inefficient way of helping those on a low income, who are presumably those who it's intended to help by exempting food. While low-income people spend much of their income on food, most money spent on food is spent by middle and high-income people, so exempting food involves a large loss of tax revenue relative to the benefit for low-income people.

Don Brash
Auckland

Overseas investors
The tone of this article "Ban could end billionaire's investment" (News, March 6) seems to be in favour of rich foreigners coming to New Zealand and building fabulous golf courses and the elite housing that goes with it.

I certainly agree with Associate Finance Minister David Parker that we want to house our own people in our own ways.

Ric Kayne, the investor, says "having discovered this country, [we] want to devote considerable resources to preserving, protecting and enhancing it".

It is difficult for me to see how building golf courses and fancy housing, which can only be afforded by the very rich, and often foreigners, will do that.

There is currently a bill before the Finance and Expenditure Select Committee on the Overseas Investment Amendment Bill.

Please do write to your MP, to the Finance and Expenditure Select Committee, or to Associate Finance Minister David Parker and let them know your views.

Joy Rising
Welcome Bay

On the mark

Good on you Tommy Kapai for calling out the elephant in the room in the TECT debate – Trustpower's majority shareholder Infratil.

This is why the current model is broken in my view. TECT, a 28 per cent shareholder of Trustpower, funds 100 per cent of the rebate to consumers as a sweetener for higher power prices.

Infratil and Trustpower's other shareholders reap the benefits of higher profits and get a free ride.

If you don't agree, then I ask you: where is my Infratil cheque? Personally, I would rather see Trustpower stand on its own two feet without a subsidy provided by only one of its shareholders, and instead see that money channelled 100 per cent into our community.

Murray Denyer
Mount Maunganui