Opinion: Here's why GST should come off fresh fruit and veg

Opinion: Here's why GST should come off fresh fruit and veg

Like the eponymous computers, apples are not only good for you, but best when they come sticker-free.

By John Pagani*

Deborah Coddington asks a fair question about Labour's policy of taking the GST off fresh fruit and vegetables:
 
"What evidence does Labour have showing the poor and unhealthy will switch from eating pies to salads? None, I'll bet," she says.
 
Good on her for not overlooking the remaining detail of Labour's tax policy. But she is exactly wrong
 
Labour has studied new research by University of Auckland and Otago University, which shows people will buy more healthy food if there is a price incentive. A price incentive about the size of GST is more effective than anything else researchers tested to get people to buy and eat healthy foods
 
That research is world-leading, peer reviewed and receiving much more academic and policy interest overseas than it is receiving here.
 
It's important because it poses a question to policymakers: Confronted with evidence that removing GST helps people to make better buying decisions, what are you going to do with that information?
 
Most policymakers simply ignore it, which is poor policymaking. 
 
State agencies, including Treasury and IRD, respond by reiterating policy purity. "Exceptions have x and y negative effects". That point is valid, but it doesn't get them as far as they think it does. Every tax policy deviates from policy purity in some respect, and the really interesting issues are:
 
First, why do the deviations occur? And, second, do the deviations from purity outweigh the advantages of purity? Are the costs higher than the benefits? This is an empirical question.
 
To put it another way, removing GST from fresh fruit demonstrably affects purchases of healthy food more than any other policy, and therefore if you are going to ignore the health advantages you have to demonstrate a better way of addressing the healthy eating issue. So far no researcher has been able to demonstrate one.
 
I am fully aware that lots of people assert different ways of doing it. That's not the same as research evidence. For example, 'why not give poor people vouchers' - that is really bad policy, leading to high effective marginal tax rates, and overlooking that it is not just a policy for the poor - the policy advantages have been demonstrated across the income scales. 
 
So to answer Deborah Coddington's question with a question - where is your evidence of a better way to address the policy issue identified by Tony Blakely's research showing that price mechanisms are more effective than anything else?
 
(Another common response is to deny the vailidity of the research because it conflicts with prejudice, a frighteningly common response, but one so obviously intellectually incoherent that it need not be debated further. For the sake of completeness, allow me also to deal quickly with the canard that removing GST from fresh fruit and veg has complex boundary issues - if you can't tell what fresh fruit and veg is, you ought to be for sale in the fresh vegetable section yourself. In Australia, where the boundary issues are infinitely more complex, the boundaries were quickly settled and cause few compliance issues today.)
 
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*John Pagani is an independent political consultant and writer who has worked as an adviser to Labour Leader Phil Goff. He writes his own blog at Posterous.

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Oh pluzeee, have you bothered to actually look at (read) that 'research'. Bwhahahahahahahahaha

To all

Here's the research for all to read for themselves courtesty of John Pagani.

Here is the summary release on GST from the researchers:

http://www.otago.ac.nz/news/news/otago013610.html

Here is the research:

http://www.wnmeds.ac.nz/academic/dph/research/HIRP/SHOP/SHOPindex.html

News release on its findings is here:

http://www.wnmeds.ac.nz/academic/dph/research/HIRP/SHOP/SHOPPublications/SHOP%20main%20study%20findings%20media%20release%20March%202010.pdf

cheers

Bernard

Lol. the 'improvement' was a modest 10% increase in the purchase of fruits and vegetables when 12.5% discount vouchers on healthy foods were given to the study participants, but it still made no difference to the value of their nutrient intake, which was actually what the original purpose of the study was all about.  

Here’s a direct quote from one of the peer-reviewed published papers they wrote.

Although SHOP [the NZ study]showed a slightly greater increase in fruit and vegetable purchases (10%) for the same price reduction (12.5%), no effect was seen on saturated fat. This may be due to variation in cross-elasticities of demand, which we have not examined in detail, or because changes of this magnitude in fruit and vegetable purchases do not substantially effect overall macronutrient purchases. Italics mine.  Mhurchu et al., (2010) Am. J. Clin. Nutr. 91:736-47

The initial purpose of this study was to study various ways to improve the nutrient intake of New Zealanders e.g., to decrease fat consumption, in order to improve New Zealanders health. They though that by reducing the cost of ‘healthy foods’ that this might be one way that that might be achieved. Their research findings did not bear this out. So if Labour wants to argue that reducing GST on fruits and vegetables is the best way of reducing obesity in New Zealand (which they do and are have argued that that is one of the major justifications for it) and they want to use this study to back that up, then they need to think again.

Nice try Bernard and John, but try harder.

10% - that would be something to get excited about surely? Saturated fat needs to be tackled in other ways - a health tax, which can go on alcohol while they're at it. That way people have the freedom to choose their lifestyle without people like me having to pay for their health care later in life....

So carry on not believing your lying eyes eh what?

regards

 Good on her for not overlooking the remaining detail of Labour's tax policy. But she is exactly wrong

The article referred to in the link only refers to those that already purchase fruit & vege. 

The question asked was whether the poor and unhealthy will switch from pies to salad.  The price incentive will only work if the healthy option costs less than the unhealthy option.  Will the price of fruit and veges be less than pies after GST is removed?

How "independent" is this guy?  Maybe he doesn't advise the Labour party anymore, but he must still believe in their policies.

huh?   the point is independant research....it isnt polictics...

Seems you are a black or white sort of guy.....the telling facet of a typical extremist it seems.

“There is reason to believe that Māori, Pacific and low-income shoppers might increase their purchasing of fresh fruit and vegetables more in percentage terms in response to a removal of GST,” says Professor Blakely. “This, combined with the fact that low income shoppers spend a bit more in percentage terms on fruit and vegetables, suggests that taking GST off fruit and vegetables is probably also a good way of reducing inequalities.”

ok so in your fantasyland we have a few ppl who dont buy ANY fruit (say 5%)...the rest of the ppl do already purchase fruit and it seems poor ppl do more, which since meat is expensive is probably correct.  So removing GST will see them buy more...so it improves the health of a substantial number of ppl.

He doesnt need to be independant, as log as the info behind him does, and it sure looks that way.

regards

The research might be independent yes, but I was questioning the independence of the messenger who like yourself might be bias towards the results rather than questioning the validity of the research and bias towards the political party using it to justify their flawed policies.

Of course it's politics though.  This is just another vote buy.  The moment you introduce exemptions to tax policy you reduce the effectiveness of that policy and add to the compliance costs.  Why not promise to increase incomes buy the GST content of fruit and vege - will the taxpayer purchase more fruit and vege - I doubt it.  Why not include milk in the exemption?  Better still add gym memberships and sports fees etc to the list of GST exempt products.  What about canned fruit and vege - why aren't these incl?  Meat is also part of a balanced diet so why not incl this?  Why not exempt GST on seeds and gardening products so we can grow our own fresh fruit and vege?

You have advised Goof to 27% John, hence you write this bullshit and studies by Universities are theoritical BS, not what will happen in the REAL world. That's the problem with the left, no real world experience.

My neighbours are in the F&V business and I asked them about the Labour policy, they say they will not drop prices by the GST amount, but by about half of this, so the saving will be close to 5-10%. From there they will see what the market dictates, but they say the whole 15% will not come off. Margins are slim already so this is looked as a way of bolstering margins.

Despite this they are not voting Labour at all.

Voodoo econmics is the problem of the right and not the centre left.

F&V, sure margins are slim but competition makes it so and I see no reason to believe they wont have to drop 15%....pie in the sky to think otherwise....

Some ppl are stupid enough to vote the same way no matter what....very immature....

regards

I'd have rather seen it taken off all food and the budget balanced by increasing it on soft drinks, alcohol and cigarettes.

And while they are at it - GST should be removed from rates.

We agrre on something Kate..including rates ...I would also include in some savings/desposts.

I think the biggest issue if cardboard food is left much longer as the 'affordable' opition, people will loose the abity to know what to do with fresh food... how to cook it.

The other existing issue is due to propaganda (marketing) people actually believe its easier to cook cardboard food than say to put on a family roast....AND do not realise there are less dishes/clean up afterwards.

The quandery is the shopper looking at what is cheaper...and sees fresh is the better cost opition..

"Hmmm this fresh food is cheaper, but how do u cook it?  and I havnt time to clean up the mess, OH better buy the cardboard food"

The govn has to collect tax from somewhere, so GST off a good such as rates, no.....

NB who would it benefit the most? Those with a rate bill, the PIs, home owners and the better off (ie with a bigger house)....hardly sensible.

regards

I don't think rates are considered "goods" for the purposes of GST, but rather (the legitimisation I've been given) is that rates provide for reticulated "services" (water, waste, stormwater, roads/public transport networks etc.), hence GST is charged.  

That said though much of our rates pay for governance costs (elections, meetings, democracy), economic development contributions, community grants, and other community/public good facilities, such as libraries, sports fields etc.  - clearly not "services" but rather public good expenditure as provided for through local authority taxes.  So for those expenses, we are paying a tax on a tax.

What LAs should be doing is distinguishing between the cost of services (GST applicable) and public good expenditures (GST exempt).  They have the ability - it's central government that does not have the will. 

OK rates debatable, but we are chassing a red herring away for the core subject, for the sake of arguement.

Well given that the price of fruits and vegetables is both seasonal and dependent on supply - which is often out of human control - how can removing GST possibly reduce their cost to below that of pies and a bag of chips? Look at the cost of tomatoes at the moment. Take GST off of those and they're still expensive. Of course given the quality of the Left’s thinking, Labour will next introduce a fat tax on the pies and chips.

Oh so lets ignore some real research behind it eh?

With GST off and the price rises ppl will be able to continue buying fruit and veg for longer...before it hits the unaffordable mark.

Add in that fruit and veg is seasonal, so you dont expect to buy tomaotes in July at a cheap price you are paying for the hothouse and/or transport. Thereofre you buy cabbages and mandarins instead which are cheap.

Thinking seems to be more damaged on the right side of th epolitical spectrum it seems.....given voodoo economics is what they seem to be best at, thats hardly surprising..

regards

in one sentence please can we have a definition of 'voodoo economics " ?

Bush (the elder) coined it in relation to Reagan's supply-side, "trickle-down" economic theory.

"that is really bad policy, leading to high effective marginal tax rates"

Which is exactly what WFF does....but wait on that was introduced by Labour and is apparently going to be extended by Labour.

John if you think for one second the supermarkets are going to pass on the total amount of any reduction you are dreaming.

Labour need policies that will start growing the size of the cake, not cutting it into ever decreasing pieces...otherwise come November you are going to get slaughtered at the polling booth.

you miised that Peak oil = smaller cake.

So lets get this right, you are an obvious rabid right winger and yet you are telling labour/left how to win? gee I bet Goff is saying thanks for that mate!

Or maybe because labour are throwing in some good policies like CGT, not selling the SOEs, first $5k tax free and GST off veg that is causing a panic in the right whingers? Those in particular who seem to be whining the loadest are those who complain that their tax is too high yet it seems run busnesses / endevors that dont pay any. these seem to be the most worried that they, shock horror might have to actually pay some tax....oh my good....actually contribute to a society they sponge off as parasites....wow....wonders will never cease.

Actually it will be very interesting to watch this election with Labour standing up and "being counted" . Voters will have a clear choice, JK aka smiling death and his policies for the rich and tax dodgers, or goofy uncharismatic goff and policies for the other 90%....bring it on is all I can say.

regards

Steven - I feel a bit sorry for you given that it must be rotten supporting a party getting only  27% in the latest poll and thats BEFORE the voters saw the Crappy Gains Tax !

Steven you really do need to get out more.

I dont think im a rabid right winger....but im sure you know better. However cynical vote buying really gets on my nerves.....but im guessing you've fallen for the spin ?

I have no problem with a CGT in principal....as long as it is used to get the economy going and not just yet another Labour lead exercise in taking off the vast majority of those who get off their bum and do a decent days work and giving to those who dont deserve yet another handout.

Having a CGT with so many exemptions is brainless.....as is having major variations in tax rates between different entities...as is having policy set by academics etc etc

BTW voters do have a clear choice...and 73% wont be voting Labour

But National have been in for three years now, and they haven't repealed WFF, so WFF is now NATIONALS policy too...

I really wonder what effect the abolution of the GST on fresh fruit will have.  In Australia a couple of weeks ago, in the supermarket we were paying A$4 to $5 for oranges and their apples, bananas $12 plus, despite no GST .  Back in NZ with 15% gst, down to NZ$2 for imported Australian oranges as low as $1 or apples and $2 for bananas.    I think supermarket margins alone will dictate the price and lowering the GST will simply be absorbed by a higher profit margin.  Nice idea, agree with the sentiment, but doubt that it will have any effect at all.

Are you for real John.. do you really believe this or is it just a write and hope others may believe it...

As long as you can buy a KFC family feast or a Mcdonalds family meal deal for $20 - $25 its going to be a long time before the poor....  and lets face it the poor in nz are not poor if we are talking about them being able to purchase toms at $14kg and Capsicum at $4 each as an alternative to junk food...

Also if you think the price of F&V will drop... HAHahahaaaaaaaa The prices change almost daily as it is and it's all supply and demand driven... the 15% will disapear into the pot within a few days..

This article might have the desired effect on Yahoo...

No doubt Labour is planning some price-cops who will police vege stores to make sure they lower their prices. Dont forget Labour knows the correct price for everything.

Price is not the reason for bad diets. Fruit and veges are already cheaper than chips.

The substitution effect will be from canned to fresh more than anything else. And the wealth transfer will be from the poor to the rich.

Im not sure Kimble..

$10 chips at the takeaways v $10 fruit and vege

I might do a test today and see how it compares... Ill let ya know

Well having just spent $10 on Fruit I got the following.

1 Kilo Kiwifruit $2

1 Kilo Banana $3

1 Kilo Oranges $2  (weren't the best but still edible)

1 Kilo Mandarins $3

Now if that is not better than $10 worth of chips, then something is seriously wrong.

 

 

 

 

The study would have to be repeated before I took it seriously. Second confounding variables would have to be considered before use as a policy justification:

"The SHOP study was a randomised trial of 1,100 supermarket shoppers, half receiving price discounts on healthy food and half not, and half receiving tailored nutritional education and half not. Price discounts were found to be effective at increasing purchasing of healthy food, but did not have a statistically significant impact on nutritional outcome measures (e.g. percent saturated fat). Nutritional education was ineffective."

How much of the extra purchased food was actually eaten? Even if extra "healthy food" was purchase was it an cost-effective benefit - extra 10% cost to the nation for only 2-3% increase in "healthly outcomings"?

Likely to be just another good sound sound bite for the election, and in the end probably more effective for middle class than anyone else.

For those who are sceptical of the research, I get that you wish the world was different. But pretending the world is different is no way to make policy. Policy-makers ought to deal with the best information they can get, even if that research tells them something they don't want.

The interesting policy question is not whether you think the research is right or not. Instead ask: what would you do if the research is right, and removing gst from fresh fruit and veg really doesn't alter people's buying behaviour?

I'm a great believer, John, in evidence based social and economic policy and policy development. In my view there is no substitute for it. And I have to compliment you and the Labour party on at least moving in that direction on this issue. But I don’t think that we should just rely on a bunch of press releases(not that I’m saying that you have) to inform want the research found. The peer reviewed published papers themselves should also be read to obtain the full and most accurate picture of the research and also to provide the opportunity to cast a bit of a critical eye over it to look for any design/interpretation, data collection and other flaws in it etc.

Anyway answer me this. Do you think that a 10% increase in the consumption of fruits and vegetables, but otherwise no overall change in the consumption of saturated fats, sugar and salt, justifies removing GST on fruits and veges? Because I’m not convinced that doing that will actually achieve the desired goal of improving the nutritional health of New Zealanders -and the research suggests that it doesn't - but the complexity that that will add to the GST system – I’m just not convinced that the cost benefit test is meet here.

The research is a load of cobblers whether it is true or not, I hope it wasn't tax payers money that was wasted in the exercise.

To use such research would be a cynical attempt at manipulation and while you can fool some of the people most of the time, or even most of the people some of the time in the end they resent it.

If you feel so strongly about it do something to change your own behaviour and leave the rest of us alone.

 

"The interesting policy question is not whether you think the research is right or not. Instead ask: what would you do if the research is right, and removing gst from fresh fruit and veg really doesn't alter people's buying behaviour?"

This seems like a great side step. Lets not bother if the study or study design is good. Lets just assume the study says what we want it to say and base our policies on that!

 

Seasonal variances in fresh fruit and vege prices are far greater than the amount of GST that is attracted by them. So I don't think removing GST necessarily makes them cheaper.

Add in to the fact that supermarkets sometimes markup fruit and veges by 400% and also sometimes use them as loss leaders, the removal of GST seems trivial and a bloody expensive system to run. I can't see it as making healthy food any cheaper.

John doesent really go far enough  -  we need more not less GST exemptions  e.g   Iwi shouldnt have to pay GST , read the Tietri O Waitangi- it dosent mention GST last time I noticed. Also I object to paying GST on hired gym equipment and visits to the local swimming pool,these are both commendably healthy activities.And then theres the unfairmess of GST on  Complan health drink my Granny needs,my sons specs and my daughters Uni  fees incurred when she finishes her thesis on " Why Labour is Manged "  etc etc

GST this way, that way, blah, blah, blah nice diversion tactics from the elite.

Theres no need for GST and there never was its a fient of misdirection for the slaves...

To complex to figure out? lol...perhaps its time to step out of the box of false normal and start researching many things on a deeper level instead of being misinformed by the lackies in corporate media.

Though we adjust our weekly shopping to buy produce in season it has been getting harder to stick to our household budget and still buy enough fresh produce. 

It may not matter to the high income earners but for a lot of middle income families like ours the GST off would mean more fruit in our kids lunch boxes.

Fanua trust me.. the price of fruit & V is going up and will continue to rise... Taking GST of makes no difference...

Best thing you can do is plant some veges and some fruit trees...

Having owned and operated an independent F and V shop for 11 years,I dont think this will have any effect whatsoever on peoples healthy eating habits.

It will take a bigger mindshift/move in purchasing options,Its no coincidence that this section is first in the supermarket at prices generally way above elsewhere yet people still pick there produce up there.

With the vagaries of seasonality and supply and demand this margin will be absorbed within all parties to levels that people are willing to pay.Bananas were $2.69-$2.99 in 1989 and they still are now because we have a mindset of not paying more than $3/kilo.

Take GST off and within three months we will be back to the same levels.

I agree, behavioural modification is a bloody hard thing. I say tax the hell out of the bad food. It's working for cigerettes, let's get the lard too...

McDonald's Chief backs GST free fruit,veg push

McDonald's New Zealand Managing Director Mark Hawthorne says the policy could see his company taking more fat off the menu.

Mr Hawthorne says the policy would give fast food chains an incentive to offer more healthy options.

He says it's hard to sell healthy food when the profit margin is lower than unhealthy options.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10681601

hahaha - "more fat off the menu  "    !    thats hilarious- they are expecting to open another 7 - 9 stores in NZ so fat chance of that.

Labour plunges to 27% in latest poll taken before CGT

There has been lots of debate on the merits/flaws in the study so far, let me add a few for completeness shall we say?

6 months after price reductions, that group bought 0.48kg / week more of healthy fruit and veges than before the price reduction, for a household, with a strong P-value... 3 apples more per week for a household?

and after 12 months, it has a 95% CI of 0.0 to 0.56 kg per week.. in other words, after 12 months, when prices had gone back, it is just as likely that those that recieved a (full) 12.5% reduction in price of healthy fruits and veges bought 0.0kg more than they did before any price reduction.

quote from Prof Blakely "[Improving our country’s nutrition]...requires strong leadership from the food industry – most notably, a full transfer of any GST exemption to lower prices.”  in other words, if the industry transfers a full reduction in price to consumers, which is in itself extremely unlikely, then after a year, it is likely that people will be buying exactly what they were before GST was dropped.

Also, the study only measured the most common items sold, which was about 17% of total items in those supermarkets, and "SHOP was conducted during a period of dramatic increases in global food prices; between January 2006 and July 2008 global food prices rose by 75%", so if they started buying any of the other 83%  foods or any food items which were introduced since the database collection phase, because of global price changes, this study's results would be severely skewed, naturally the direction could not be predicted.

A good attempt at design to test the hypothesis, but not a particularly strong study as the variables are hard to control, but a good attempt none the less.