A recent Newshub Reid Research poll indicates that over 75% of Kiwis do want the government to remove GST on food prices and that the government has not done enough to control the spiralling cost of living. With food prices having risen by 7.6% from March 2021 to March 2022, consumers are increasingly struggling to shop for essential items. Fruits and vegetables have risen by a staggering 9.4%, while wages lag behind, having risen just 3%.
Te Pāti Māori had in March 2022 announced a petition calling on the government to remove GST on all foods as a show of commitment to their support for citizens and to help eliminate poverty in the country. Party Co-leader Rawiri Waititi said that the current tax system was poor, causing the poor and working-class to subsidize the lifestyles of the rich. The party is seeking to have this tax covered by new taxes to be imposed on the wealthy through capital gains tax, financial services tax, ghost house tax, land tax and pollution tax.
However, some financial experts are opposed to this move, saying that the current kiwi tax system is simple. University of Canterbury’s Economics Lecturer, Stephen Hickson, has stated in an op ed piece on the Conversation that removing GST on certain foods, such as the proposed ‘healthy foods’ would make the tax system more complex and costly. He noted that there were likely to be complications in categorizing which foods would qualify for tax exemptions, highlighting similar cases of controversy in countries like Australia, Ireland and the UK.
Hickson further noted that providing exemptions may not lead to a price drop that people expected and that consumers and producers would likely end up sharing the burden of the tax exemption. He proposed that instead of removing GST, the government should continue to collect the tax and refund it to those that need it as lump sum benefits payments. As higher-income households spend more money on shopping, they will be the biggest contributors to the tax, and if the funds are equally distributed, lower-income households are likely to be the biggest beneficiaries of such payments.
In a piece for Stuff, writer Mike Yardley expressed a similar opinion, noting that though food prices in Australian supermarkets were lower by about 10-15%, there was messy bureaucracy involved in how GST exemptions were selectively applied to food purchases. He also commended the simplicity of New Zealand’s GST tax regime and criticised calls to have healthy foods exempted yet there was no clear guidance on where this loss in tax income would be recouped from.
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