Supermarkets on political hit list respond to claims they’ll pocket GST cuts

Complex forensic investigations - in the supermarket aisle - might be needed for shoppers to know if they benefit from Labour’s proposed removal of GST from fruit and vegetables.

And a community activist at the frontline of poverty reduction says it’s unlikely the GST overhaul will make much difference to families struggling with numerous problems in need of long-term solutions.

A tax expert told the Herald removing GST from fresh fruit and vegetables was likely to be very complex and expensive for retailers.

Deloitte tax partner Robyn Walker said many retailers would have to update IT systems - and such updates were almost always more expensive and complex than anticipated.

There would also probably be many issues establishing boundaries about what was and wasn’t eligible, Walker said.

“How much processing do you have on something before it’s considered to be processed?”

Fresh produce prices were frequently volatile, and so was consumer behaviour, so it was not apparent how shoppers would actually know if GST savings were passed on, or gobbled up by retailers.

“That’s the hard job that the Grocery Commissioner’s going to have.”

Walker said GST provided about a quarter, or $25 billion, of the Government’s tax take.

“It is an expensive policy. You’re looking at about half a billion a year,” she said of Labour’s proposal.

She said overseas studies found GST cuts or increases did not lead to comparable savings or even increases for consumers.

That was partly because factors other than tax determined the price of produce, but also because retailers - especially smaller ones - preferred to sell goods for the roundest number possible.

Community leader Dave Letele at work at his food bank in Māngere supporting people after the Auckland floods. Photo / Dean Purcell.

Dave Letele, BBM Motivation founder and 2022 Kiwibank New Zealand Local Hero of the Year, said long-term, multiparty initiatives were needed to address chronic poverty and deprivation in marginalised communities.

“I don’t really see it having a huge impact on us,” he said of the GST proposals.

“The real problem is not that poor people can’t afford fruit and veg. It’s the fact they are poor. That’s the issue.”

Letele said people he interacted with often worked multiple jobs, and were starved of time as well as nutritious food.

“The problem is there’s nothing convenient and healthy and cheap where we are. It’s a health food desert in any deprived area.”

He said other policies, such as a universal basic income, might have more impact. But he also said long-term, multi-party initiatives were needed.

Some families were so busy working to survive, there was no chance for them to educate children around healthy lifestyles, he said.

Letele said parties obsessed with the three-year electoral cycle had not focused on delivering long-term solutions for poverty.

“I am hopeful. But I’m a realist too.”

Letele said the best thing lately in terms of public policy was the Ministry of Social Development providing support for groups such as BBM and other community initiatives.

Letele said he’d considered standing for Te Pāti Māori this year but had ruled that out. BBM’s initiatives included a foodbank and fitness classes, and Letele had also worked on a TV show confronting addiction issues.

The GST reforms once dubbed an unworkable “boondoggle” by Finance Minister Grant Robertson now seemed to have Robertson’s support.

Labour said it would take GST off fruit and vegetables from April 1 next year, saving families about $20 a month.

The Labour Party has said taking GST off fresh produce from next April should save families about $20 a month. Photo / Mark Mitchell

It said the Grocery Commissioner would monitor supermarkets, and report publicly to make sure cost benefits reached consumers.

“Fresh and frozen fruit and vegetables will have GST removed, but this won’t apply to canned and dried items, or to juices,” Labour said.

Big supermarket chains - facing rhetorical attacks from both Labour and National - responded today.

“Labour’s GST policy is a miserly offering that will do very little to help families suffering through the cost of living crisis, but will have supermarket owners rubbing their hands with glee,” National Party deputy leader Nicola Willis said.

“Labour are foolish to suggest supermarkets will pass all of this reduction on to shoppers.”

Countdown rejected suggestions it would not pass on savings to shoppers if GST was removed from fresh fruit and vegetables. Photo / Mark Mitchell

Spencer Sonn, Woolworths NZ managing director, disagreed.

“Countdown would comply with any changes to the rules around GST and we’d of course pass on any savings to our customers,” he told the Herald today.

Foodstuffs, operator of Pak’nSave, New World and Four Square, was also asked about Willis’ remarks.

“With food cost and price inflation still high, our 520 grocers are focused on buying well and running their businesses as efficiently as possible to ensure the supply of fresh food and groceries for all New Zealanders and delivering value for customers at the checkout,” a Foodstuffs NZ spokeswoman said.

It said any future government should ensure a “workable regulatory environment” allowing for agility and efficiency was in place.

The company also said any future government should invest in national infrastructure, and make it easier to do business in New Zealand.

John Weekes is online business editor. He has covered courts, politics, crime and consumer affairs. He rejoined the Herald in 2020, previously working at Stuff and News Regional, Australia.