To be clear…. Any package that offers people relief on the cost of healthy food (plus a boost to Working For Families entitlements) is welcome, and better than nothing. If enacted, Labour’s move would also create a precedent for expanding the exemption in future. That’s where the good news begins and ends.
To be equally clear, Te Pāti Maori have the right policy on this issue. As TPM argues, our GST food exemption should, as it does in Australia, remove GST taxation from all unprocessed food and ingredients i.e. meat, fish, bread, eggs, flour, cooking oil, and all produce including fruit and vegetables.
To be fiscally neutral here, a wide ranging exemption along Australian/Te Pāti Maori lines would have to go hand in hand with revenue-raising measures such as a wealth tax, or a tax on the excessive “windfall” profits being made by banks and supermarkets,
Yet this allegedly centre-left government has repeatedly refused to take those options. As a result, this GST exemption has been narrowly framed to provide relief only on purchases of fruit and vegetables. That modest exemption has been estimated to save the average household between $4 and $5 on an average weekly household spend on such items of $32.50. Think of it as the political equivalent of those in-house supermarket loyalty cards. Join the Labour Loyalty Club, and get $4-5 off your weekly bill! The WFF increase will deliver far more relief – up to circa $45 a week to 160,000 families – but only to those eligible for the WFF scheme, and this does not include beneficiaries.
So… Both Labour’s initiatives and National’s criticisms have been about symbolic politics rather than responses to genuine need. Labour’s gesture may truly be “miserly” as widely claimed. Yet National – given its hostility to minimum wage increases and to Fair Pay Agreements– has no credibility on cost of living issues.
Nor should National and its friends in the mainstream media be badgering Labour over billionaires enjoying a GST exemption on fruit and vegetables that they don’t need. Pots calling kettles black etc. National’s tax cuts have always been socially inequitable, in that they have delivered the bulk of their benefits to the already wealthy, while leaving those on low incomes with the crumbs from the table.
Passing it on
The other common objections – that making the exemption would (a) be hard and costly to administer and would (b) sully the purity of our GST system are ludicrous. It wouldn’t be hard to implement or manage such an exemption. Long ago, the Australian Tax Office and Aussie supermarkets developed codes that enable seamless scanning of the items involved, and these codes could readily be adopted here. After all, one of NZ’s two supermarket chains is Australian-owned.
As to whether the supermarkets will pass on the exemption… This will test the mettle of the newly appointed Grocery Commissioner. It will be useful to have such an early, sharp-edged test of the Commissioner’s effectiveness. If, as some have suspected, this office is primarily a rubber stamp, the GST exemption issue will make that clear sooner, rather than later.
Meaning: if the GST exemption is not passed on, the case for structural reform and the breaking up of the supermarket duopoly will become even more glaringly obvious. In other words, the supermarkets have a keen self-interest in passing the exemption on to their customers, if only as a gesture of good will in a climate of predatory pricing, and as a way of avoiding more stringent remedies.
Finally… As for the claim that the GST exemption for fruit and vegetables will violate the purity of the GST system… Hello? Our GST system is not virginal. Look at the list of existing exemptions, which include financial services. Yep, you have long been able to get a GST exemption for trading in stocks and shares, among other things. Yet a GST exemption for fruit and vegetables? Heaven forbid!
Here are some of the items already on the IRD’s list of GST exemptions: donated goods and services when re-sold, financial services, currency exchanges, trading in stocks and shares, bank fees, mortgages, financial planning services, the supply of fine metals (?) and rent. Yes, that’s right. The GST system currently recognises and easily manages the social desirability of a GST exemption that helps us put a roof over our heads, but not one that enables them to put food on our tables.
In that respect, Labour’s limited move to exempt fruit and vegetables from GST is a belated step towards correcting a glaring anomaly. If we shouldn’t be taxing peoples’ access to shelter, then we shouldn’t be taxing their access to food, either.
Footnote: This morning, RNZ was badgering Finance Minister Grant Robertson with the findings of a seven or eight year old survey that RNZ dredged up that said – surprise surprise – some Australian firms objected to the Australian GST exemptions on food. They would say that, wouldn’t they?
A more telling line of inquiry for RNZ would have been to ask why the wide ranging GST exemption available in Australia long ago stopped being a controversial political issue. For years now, there has been bi-partisan support for the exemption, and the Australian supermarkets – which face far more competition over there than they do here – comply with it, without a murmur. Only here, amongst OECD countries, is a very limited GST exemption for healthy food still an issue, economically or politically.
Defence spending, always affordable
Did anyone, anywhere, ever ask whether a war was affordable? While we quibble about whether we can afford to spend half a billion dollars to help people buy healthy food, far more costly priorities get signed off without a qualm.
In the next column, Werewolf will be looking closely at defence spending, and at how our membership of AUKUS would erode our ability to pursue an independent foreign policy. (Helen Clark has voiced her misgivings on that latter point) The current Labour leadership seems all too willing to bend the knee to pressure from the US, UK and Australia on any defence and security matters to do with the alleged China “threat.”
On Defence, the cheque book is always open, and especially so under the last two Labour governments. Under the Labour-led coalition that took office after the 2017 election, circa $3 billion has been spent so far on acquiring and kitting out a fleet of new Poseidon anti-submarine planes.
A further $1.5 billion has been spent on buying new Hercules cargo planes. Yet there is another huge defence expenditure item coming down the pike, Namely, the replacement for the frigate fleet. A couple of days ago the Australian Finamcial Review had some fascinating new information on that front:
Australia and New Zealand could team up on building a new fleet of light frigates, with British shipbuilding giant Babcock pitching the proposal for its Arrowhead frigate to Defence amid a major naval review.
And furthermore:
Industry sources say Babcock’s light frigate is gaining traction with elements of the [Australian] navy. Larger than a corvette at 5700 tonnes, this offers it a longer range – important for operations in the South China Sea or Indian and Pacific oceans – as well as the ability to carry more missiles. One source said the Kiwi navy had told Australian officials that if the Albanese government went down the path of selecting a light frigate such as the Arrowhead, New Zealand would be keen to partner.
Good to know. Evidently, New Zealand is “keen” to enter into a joint purchase agreement to buy large new frigates. (The Babcock frigates would be 5,700 tonnes versus the existing 3,600 tonne ANZAC frigates.) As with AUKUS, this joint purchase would be dictated by economies of scale derived from embracing Canberra’s aggressive stance towards China, along with the belligerent AUKUS policies of forward force projection.
This is happening before anyone in the Hipkins administration has told us about a frigates deal that seems well in train. More on this in the next column.
Fruit and vegetables songs
Brian Wilson of course, used his love of vegetables as a pretext for some typical featherlight harmonies:
And in similar vein, there’s this loose limbed workout by singer/rapper Kevin Absract – of BROCKHAMPTON fame – on his song “Peaches”.
Finally… In this Chiquita Banana commercial from 1944, Carmen Miranda offered some good advice about the best treatment of bananas