Winston Peters debates New Zealand First's GST off 'basic food' policy, says would cost $600m-$700m and that group of everyday NZers would be setup to determine what 'basic' means

By Alex Tarrant

I remember before a Sky News 2011 Election interview, our panel of journalists coming up with a cracker way to tackle Phil Goff on Labour’s policy of taking GST off fresh fruit and vegetables.

We sent one of the team down to the local shops to buy an unpackaged cabbage, some lettuce in a bag and a McDonalds salad in a plastic container. Then during the interview Barry Soper whipped them all out and asked Goff which would be GST exempt.

Would the packaged ones attract the tax because they had been processed? If the McDonalds one had been spread with mayo then would the salad be exempt but the mayo not? It was the most fun I’ve ever had in a TV studio, where you’re usually spending most of your time nervous about getting a number wrong or swearing on live TV.

It is generally regarded within the tax and economics community that exempting certain goods and services from GST will start a government off on a road arguing over further exemptions and lead to challenges over whether something does or doesn’t fall under an exemption banner (such as in Australia with ciabatta). It’s a road to eroding a tax base which is easy to collect and easily understood.

Thankfully in New Zealand we’ve been largely able to steer clear from such a debate at subsequent elections – at least from the two major parties – with Labour finally seeing sense. It didn’t look to be an election issue in 2017.

That was until Winston Peters was interviewed on RNZ’s Morning Report Thursday, which included a what some might call a comical segment on New Zealand First’s ‘GST off food’ policy.

Before we go further – I’ve got a speech from Peters in my inbox from August 18 this year, where he talks about a policy of GST off basic food, which would likely cost $600 million to $700 million a year. I have one from 2015 when Barbara Stewart talks about GST off healthy food, and another from Richard Prosser in 2015 where he talks about GST off basic food items. In 2014 a series of party speeches only discuss taking GST off food.

Until this morning, NZ First had slated on its website a policy to take GST off food, at the cost of $3 billion. After a short session arguing over the details with Guyon Espiner, we know for certain now that it is a policy of GST off basic food items, which should only cost $600 million to $700 million a year – the website has been updated.

Espiner was quizzing Peters on his call for full disclosure from Labour on their tax policy. Let’s talk about NZ First’s own policies, the host said, raising the GST debate. It had followed an exchange over how much Peters’ general policy platform might cost - $10 billion over seven or eight years, if you’re wondering.

“You want to take GST off food,” Espiner put to Peters. “No, off basic food,” the response came. “There’s a huge difference, you see,” he continued. “Off food, you get a huge bill. Off basic food you’re talking something in the zone of about $600 million to $700 million.”

The policy on the website regarding $3 billion for GST off food, should have been corrected a few days ago by a staffer, Peters said – he even admitted it was a mistake.

Espiner: “This is laughable isn’t it? You’re asking for full disclosure from Labour and criticising them, and you can’t even get your own numbers right.” Peters: “Well I’m giving you full disclosure right now. Parties make mistakes, and in this case, it’s been corrected.”

Then the inevitable exchange over what might be exempt and what won’t be. Espiner put a quote to Peters – from him – that the policy would ensure “most of the food” in an average family’s supermarket trolley would be exempt from GST.

“Basic food, yes,” Peters said. “If you have difficulty understanding it, ask your grandmother. Because usually your grandmother would know what basic means.”

A packet of chips or biscuits?

“Chips, no. Chips are not basic food.” Biscuits? “No, biscuits aren’t basic food.” Bread? “Yes, it is.”

So who decides what’s basic and what isn’t? We ask our grandmothers?

“It’ll be listed by people who are your everyday, ordinary people who understand common English. They know it’s not luxuries, they know it’s not this. It is essentials and it’s basics,” Peters said.

Who draws up the list?

“I’d get a team together of people who are practical everyday New Zealanders. Men and women and we’d come up with a list of what basic means.” Peters said he’d “got a couple of economists on to it” in terms of coming up with the $600 million to $700 million price tag about three-and-a-half years ago.

“I can’t understand how that mistake is there,” he said of the website.

Company tax

Onto company tax – New Zealand First want to reduce this from 28% to 25%. Asked how much this might cost each year from a reduced tax take, Peters moved into attack mode. “I was the former Treasurer, I’ve got a good idea of what I’m talking about,” he began. “It’s not so much a cost; I think it’ll be an actual earner. The moment you do that, there’ll be far better injection into New Zealand business, more interest in investing in New Zealand business, and it will turn around pretty quickly.”

While there would be a short-term cost, “If you go there from where the government is presently talking about tax reductions in private income, there’ll not be a huge cost, possibly $2.5 billion [a year].”

Then onto the policy that exporters would only attract a company tax rate of 20%. Growing export business would mean businesses started to add value here, pushing New Zealand to become like Norway, Singapore and Ireland, Peters said. “You don’t have a loser economy like you’ve got now,” he said. “Your ideas that you’re defending now, have been tried for 33 years and we are sliding down the OECD.”

Back to the initial cost of reducing exporters’ tax rates to 20%: “Well we’ll never know that until we know,” Peters said. “You do not know until you know the level of the take up.”

SOEs

To New Zealand First’s policy to bring the power companies partially privatised by National into public ownership (“At the appropriate time,” Peters jumped in) …and put them back into a single generating entity.

How much would that cost? “Well you won’t know that because it’s, at the appropriate time.” Onto New Zealand Railways – it was trading at $9.34, and fell to 28c. “That was the appropriate time for the Labour Party to buy it back.”

“If you know anything about the market, you know you pick the best and optimum time to make your move. And that’s in my policy.”

It was put to Peters that the policy states the shares would be bought back at no greater price than that paid by the first purchaser. “Well that’s axiomatic, isn’t it,” he chuckled. “It cannot hardly be an appropriately smart deal if you’re buying higher than they were sold [for] in the first place.”

When could this happen? “If the appropriate time is in your second or third term, that’s the appropriate time.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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30 Comments

Just leave GST alone - it works well.

It sounds so good - fooled Labour in the past and fooled the Brits and other countries. But a recipe for employing computer programmers and accountants in unproductive ways and surely NZF should realise all those ethnic dairies will magically only sell 'basic food'. Sounds good but a really crap policy for NZF to promote. If they are worried about poor people eating healthy then either increase benefits or subsidise producers.

Yes, the intent is honorable - the solution to address it messy, to say the least.

I'd have no problem if they pledged the $600-700 million pa and distributed it nationwide to food banks. They only provide those basic foodstuffs that he is talking about.

Kate: I wish I could write as well as you. you say what I was thinking but say it better. I have programmed retail software in other countries in the past and GST is a big pain.

It actually works well in Australia despite the single example this writer gave. It's not that complex at all.

My pleasure, Lapun - glad you thought it a good idea. NZ First also want to take GST of those components of your rates bill that do not relate directly to the provision of services. That would be an easier one to do and it's a really good idea, because on those other aspects of rates, GST is a tax on a tax.

All bluster and bullshit. Not someone who deserves to be in parliament.

Giving supermarkets a tax-credit and accountants a pay rise. Good job Winnie.

If they did do it, they would need to pretty much regulate basics food prices. Isn't this a Labour policy anyway, as I recall it was back in 2010 or so?

Good common sense ideas. Taking GST off certain food items is easier than most critics like to think, it does not have to be complicated.

The phrase basic food items is so complicated that he had to promise to form a working group: "I’d get a team together of people who are practical everyday New Zealanders. Men and women and we’d come up with a list of what basic means.”

So basic has now become so complex that instead of your grandmother we need people with PhDs...

everyday New Zealanders could easily agree on basic foods - pies, KFC, Big Macs, beer, cheese rolls, kiwi dip, lolly cake, jelly tips. Taking GST off these would save people $000s,

I guess a working group is just to agree on things a bit better, much like a jury group is composed I suppose.

What makes it common sense? Why food? Why not power, petrol, and other basic costs of living?
I assume bread is basic food. What if they put raisins in it? What if they put lots of sugar in it? What if they put icing on it? What if they deep fry it? You basically need a team of 'grandmothers' categorising every single piece of food in the country.

Maybe I'm wrong and it's more honorable than common sense as Kate mentioned.

Food is a fundamental cost of living as you cannot exist without it. You can exist without electricity and power.

Regarding your bread example, the criteria for GST free status could involve less than x% sugar, less than y% added fruit. Excludes deep fried bread.

The list of foods could be updated once a year.

Homes are also a fundamental cost of living. Why do we make them so expensive and not incorporate that into ones overall health and wellbeing?

double post.

Labour had some stupid idea to subsidise heating. All the parties are terrible with subsidies except for Act, who want open borders. Democracy doesn't work when people are this stupid.

The following foods are GST-free:

bread and bread rolls without a sweet coating (such as icing) or filling – a glaze is not considered a sweet coating
cooking ingredients, such as flour, sugar, pre-mixes and cake mixes
fats and oils for cooking
unflavoured milk, cream, cheese and eggs
spices, sauces and condiments
bottled drinking water
fruit or vegetable juice (of at least 90% by volume of juice of fruit or vegetables)
tea and coffee (unless ready-to-drink)
baby food and infant formula (for children under 12 months of age)
all meats for human consumption (except prepared meals or savoury snacks)
fruit, vegetables, fish and soup (fresh, frozen, dried, canned or packaged)
spreads for bread (such as honey, jam and peanut butter)
breakfast cereals.

All or nun,

Cross pasted from the 90 sec at 9 thread:

Seeing as how Winnie the Wizened is all for taking GST off of 'basic food', here are a few examples from the Big Dry Red Country across the ditch about how blindingly simple it really is....

Simple definition of 'food' https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/GST-and...

Simple definition of food along the food chain: https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/GST-and...

Simple definition of GST-free food https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/GST-and...

Simple definition of food-which-isn't-food https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/GST-and...

Simple definition of how to see if your 'food' is taxable https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/GST-and...

Simple definition of your business accounting needs if you deal in food https://www.ato.gov.au/business/gst/accounting-for-gst-in-your-business/...

Simple definition of Simplified Accounting Methods if you deal in food (just classify yerself correctly, mind, there are Penalties for telling porkies - taxable or not) https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/GST-for...

See? It's Simple!
/sarc

LOL ... cooking ingredients, such as flour, sugar

https://en.wikipedia.org/wiki/Jaffa_Cakes

McVities defended its classification of Jaffa Cakes as cakes at a VAT tribunal in 1991, against the ruling that Jaffa Cakes were biscuits due to their size and shap...

Our GST works well and brings in good money for the govt due to being no exceptions and at 15%. Would be a compliance nightmare and endless arguments about what comprises a basic food. Also does Winston really think the fruit and vege prices would stay a bit lower. They wouldn't. Prices would be back to pre GST changes prices quicker than he could finish a bottle of single malt. And any benefit would go to the sellers and producer, not the consumer. No one could prove it wasn't seasonality or supply and demand. I can't notice any difference in prices between the supermarket and the non GST registered vendors at the Farmers market. This is one of those feel good political slogans which is completely impractical.

You're saying removing taxes won't make things cheaper for people?

In that case, why argue adding taxes will make things more expensive for people?

Removing tax from food will still see suppliers competing on price, and thus will result in lowering of prices. Your farmers market example relies on the ability to price about the same as supermarkets but simply pull in more profit.

Competition works. It's a foundation element of capitalism.

Basic food..Bread, Milk, Eggs and Banana. May be Baked beans too. Period.

Alex - suggest you contact some Oz folks - accountants, food retailers and the like - to get their views on just how Simple the whole thing really is. Would stop a lotta needless electron-torturing on these 'ere threads.....

What about basic beer?

You should be good, Winnie will be looking for GST-less basic Whisky

How hard is it to work out Basic foods. Get an old Aunt Daisy or Edmonds cookbook and learn what can be made from scratch and you are there.

Where there's no will, there's no way.