The Labour Party will remove GST from fruit and vegetables if returned to power after the October 14 election.
It will cost about $2 billion over four years, will apply only to non-processed fresh and frozen fruit and vegetables and is expected to save every household just shy of $5 a week.
It comes as part of the party's tax policy, which was announced today in Lower Hutt — and includes a declaration from finance spokesman Grant Robertson that Labour would not introduce any new taxes.
It also includes the "largest ever" increase to the In-Work Tax Credit to about 160,000 families.
Further changes to Working for Families abatement levels that would take effect in 2026 would make about 175,000 families almost $50 a week better off by 2026, according to Labour.
Labour leader Chris Hipkins said the policy would "ease pressure" on the cost of living for families "as we get through this inflationary cycle".
"Inflation is tracking downwards, including food price increases, but food is always a big cost for families — so this is a good policy for today and the future.
"Other countries, including Australia, take GST off fruit and vegetables. In fact, most countries that have a form of GST have carve-outs for certain items, and if anything, New Zealand is currently an outlier."
It’s estimated it will save households around $5 a week. (Source: 1News)
The concept of taking GST off particular food items has previously been called a "boondoggle" — an unnecessary and fruitless exercise — by Robertson, and it has been criticised as difficult to implement.
But Hipkins said in the "modern world" with electronic transactions it was "a fairly simply policy to implement".
"Our aim is to have it in place as soon as 1 April next year."
Taking GST off fruit and vegetables and increasing Working for Families would make many low and middle income households with young children about $30 a week better off by next year, he said.
"Once fully implemented, low and middle income families with kids will be over $50 a week better off on average, and when you add other components of the package such as 20 hours free early childhood education some families will be saving hundreds of dollars a week."
Hipkins said a lot of those who opposed the changes weren't "the ones worrying about their weekly food bills".
He said taking GST off fruit and vegetables was not a "silver bullet" but alongside other measures would make a "meaningful difference".
"This policy is aimed at New Zealanders for whom every dollar at the checkout matters."
He said to ensure retailers passed on the "full impact" of GST removal, the new Grocery Commissioner would monitor supermarkets' pricing behaviour, and "take action" if it wasn't happening.
Labour's policy document clarified the "zero-rating" — removal of GST — would not apply to dry or canned items, nor to juices.
"We have to draw a line somewhere and where we have gone is affordable, practical, and achieves our policy aims. There are boundaries everywhere in the tax system and we’re confident tax officials can make it work."
It said the definitions were based on whether the fruit or vegetable had been processed — in this case that meant cooked or combined with other ingredients.
"There will always be line-calls to be made. We will, as a priority for the incoming Government, establish a consultative expert group to work through the finer details of the policy and help develop the empowering legislation."
Hipkins said Labour's 10-point cost of living package included free doctor's prescriptions, cheaper childcare and 20 hours free ECE for two year olds, free or half price public transport for children and young people and now GST off fruit and vegetables and a $25 boost to Working for Families.
"And there’s more to come.
“The current economic environment means now isn’t the time for unfunded and inflationary tax cuts. Providing targeted support to cut the costs of the basics for those who need it the most is a better plan and smarter economics."
Hipkins took a swing at National's tax policy, saying New Zealanders had a "clear choice" between "huge tax cuts for millionaires and CEOs under National, or relief at the checkout and support for working families under Labour".
"For those who like this policy, my message is to give your party vote to Labour.
"Christopher Luxon won't remove GST and has said he will reintroduce $5 prescription charges. This policy will only happen under a Labour Government."
Working for Families changes
Labour would, if re-elected to government, increase the in-work tax credit by $25, from $72.50 to $97.50. It would begin on April 1, 2024 for families with one to three children.
The tax credit is paid to working families and is aimed at ensuring they are better off working than not.
Families receive an extra $15 a week for each fourth and following child.
A longer-term policy was to lift the Working for Families abatement threshold to $50,000 from April 1, 2026.
That was aimed at ensuring families kept more money when their pay increased or if they picked up extra work.
The Working for Families abatement threshold is currently $42,700 per annum, but increases to the minimum wage and wage growth meant more families were closer or over the threshold.
Labour's policy document stated less than 350,000 families received the tax credit at the start of 2021 compared to more than 420,000 in 2011.
No new taxes
Robertson said the GST announcement and Working for Families Tax Credit changes are the centrepiece of Labour's tax policy for the election.
He said there would be no changes to income tax levels and no new taxes — including a wealth tax or capital gains tax — something Hipkins has previously ruled out under his leadership.
"As part of Labour's responsible management of the Government's finances, we propose to remove the last remaining large Covid-19 economic stimulus measure.
"In March 2020 we reintroduced depreciation for non-residential buildings to support commercial property owners through the pandemic, after it was removed by the previous National Government. Removing this will help fund the commitments being made today."
SHARE ME