Finance Minister Grant Robertson says “everyone else in the world” has tax exemptions such as for fresh fruit and vegetables, and so can New Zealand.
The Finance Minister gave a speech at the Financial Services Council’s annual conference on Wednesday, which is this year being held in Auckland with a theme of building consumer confidence.
Robertson said the global outlook was challenging. New Zealanders were having a tough time with the cost of living and Chinese consumers’ falling confidence was clearly impacting the country, with falling demand hitting dairy prices.
He said the Government’s proposal to exclude the 15% Goods and Services Tax (GST) from fresh and frozen fruit and vegetables was part of a package of measures aimed at helping people struggling with rising interest rates and inflation.
Robertson was famously against the idea of such a tax exclusion in the past, and tax experts have said tinkering with GST will add complexity and cost to the tax system without targeting people who need the most help.
The Finance Minister told the FSC conference audience that because the GST exemption was part of a suite of changes aimed at the cost of living it made sense.
The Labour Party also announced an increase of the In-Work Tax Credit by $25 a week to $97.50 ,which it said would benefit about 160,000 families and said it would lift the Working for Families abatement threshold to $50,000 in 2026.
Roberton said he “came at this as a cynic of this policy”.
“... But actually the more work I've done on it, and the more I have looked at it, I think NZ is not that different from anywhere else in the world where there are zero ratings or exceptions for certain things from VAT or GST system, so we can make it work. I acknowledge it's new, and therefore we will get lots of questions about it, but if everyone else in the world can do it, so can we and it can help with the cost of living, to some extent.”
Robertson said despite the difficulties in the global outlook, the New Zealand economy was 6% larger than before Covid-19, the Government had relatively low levels of debt and unemployment was low at 3.6%.
He said he would call the New Zealand economy “resilient but impacted”. Robertson said the migration turnaround was positive, and while the corporate tax take was down, people were in work meaning PAYE was up, and he said Government spending was tracking lower than forecast.
From here, the New Zealand economy needed to make that transition to one with high wages and low emissions.
Robertson said the biggest challenge facing the next Government would be climate change adaptation and mitigation, and said some current financial sector products and services were not fit for purpose, and the industry needed to work together with the Government to change them.
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