Labour to announce no GST on fruit and vege policy

Photo / The Aucklander

Labour is expected to announce tomorrow its $270 million policy for removing Goods and Services Tax (GST) from fresh fruit and vegetables.

GST will go up 2.5 per cent to 15 per cent this Friday as part of what the Government is calling a tax switch - also on Friday, income taxes will go down.

Finance Minister Bill English said while there would be a few individual circumstances where people were worse off after the changes, the majority would be better off.

"This is not a lolly scramble, it was never meant to be. It's about changing the incentives in the economy so in the long run we've got more savings and exports and investing, and less property speculation and excessive borrowing," he told TVNZ's Q and A programme.

An average family would be $25 better off, an individual by $15, he said.

Labour's finance spokesman, David Cunliffe, said anyone earning under $80,000 a year would be worse off under the changes because of forecast inflation, increased ACC levies and electricity costs.

Mr Cunliffe said Labour would be making a "positive announcement" about GST tomorrow at its cost-of-living campaign launch in Porirua tomorrow.

That was likely to include removing GST from fresh fruit and vegetables.

"It's certainly an option that we've been considering very carefully ... it's likely to increase consumption of healthy food and it's certainly likely to save Kiwis money at the checkout counter," he told Q and A.

Removing GST from fresh fruit and vegetables would cost $250-$270m, he said.

"Getting the price of cigarettes up has brought in about $200m ... that's pretty much a wash."

Slovenia was the only country in the Western world with a high consumption tax rate and no concession for some type of food, Mr Cunliffe said.

Rahui Katene's members bill to remove GST from healthy foods was rejected by Parliament earlier this year after the Government refused to support it.

Prime Minister John Key said GST worked because it was a simple system.

"We've compensated for GST through personal tax cuts, so we are not going to move on and take GST off food," he said at the time.

Mr Cunliffe said removing GST from fresh fruits and vegetables was simpler than from food defined as "healthy food".

"...The great thing about fresh fruit and vegetables is most people actually know what a fruit or vegetable is," he said.

"There's not a great deal of debate about it, and by defining narrowly like that, if that's what we do, that would certainly remove the need for an army of bureaucrats."

- NZPA