New Zealand’s ruling Labour Party said it will exempt fruit and vegetables from the Goods and Services Tax if it wins a third term at elections in October.
(Bloomberg) — New Zealand’s ruling Labour Party said it will exempt fruit and vegetables from the Goods and Services Tax if it wins a third term at elections in October.
Unveiling the party’s tax policy Sunday in Wellington, Prime Minister Chris Hipkins also pledged to increase benefits for low-income families that he said would deliver an average of NZ$47 ($28) a week to 175,000 households when fully implemented in 2026.
“The cost of living is the biggest issue facing New Zealanders in this election,” Hipkins said. “A lot of the people who oppose these changes aren’t the ones worrying about their weekly food bills. This policy is aimed at New Zealanders for whom every dollar at the checkout matters.”
Tax is shaping as a key battleground issue for the Oct. 14 election. The main opposition National Party, which is currently ahead of Labour in opinion polls, is promising tax cuts.
Food prices have soared in a post-pandemic bout of rampant inflation, exacerbated by a cyclone in February that destroyed orchards, vineyards and farm crops in some of New Zealand’s most productive areas.
Food-price inflation peaked at 12.5% in April, when fruit and vegetable prices surged an annual 22.5%.
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Labour’s plan to remove the 15% GST from fresh and frozen fruit and vegetables from April 1 next year would save the average household about NZ$18 a month, Hipkins said. Low-income families would also get NZ$25 more a week through an increase to the in-work tax credit from April 2024, he said.
The party also promised to raise the abatement threshold in its “Working for Families” assistance program to NZ$50,000 by April 2026, so that working families keep more when their income increases.
Hipkins sought to head off criticism that the GST exemption could be complicated to enforce and might not be passed on to customers, saying other countries, including Australia, take the tax 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,” he said. “In the modern world with electronic transactions it’s a fairly simple policy to implement.”
The GST exemption would cost about NZ$2 billion over four years, while the support measures for low-income families would cost about NZ$1.4 billion over the same period, Labour Party costings show.
Finance Minister Grant Robertson said in a statement that the policies would be partly funded by the removal of depreciation for non-residential buildings, which was re-introduced to support commercial property owners through the pandemic.
Labour, which has already ditched plans for a wealth tax, won’t make any changes to income tax levels, he said.
National has said it will lift the income thresholds at which higher tax rates kick in, but has yet to say how it will fund the policy.
“We have taken the decision that now is not the time for widespread changes to our tax system,” Robertson said. “Our focus is on doing what we can to support Kiwi families in a tight global economic environment.”
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