The final details of Labour's tax policy have not been announced, but if GST was removed from fruit and vegetables, the average New Zealand household would only be $5.63 better off each week. Photo / Paul Taylor
The average New Zealand household would only be $5.63 better off each week if GST was removed from fruit and vegetables while wealthier households would have much more to gain, a Herald analysis shows.
A tax expert says removing GST from fresh fruit and vegetables could only end up benefitingthe highest-earning New Zealanders and corporate companies, rather than those that need it most.
National’s finance spokeswoman claimed to have received the details of Labour’s new tax policy last week, which included removing GST from fresh fruit and vegetables. Labour is expected to announce its tax policy in the coming weeks.
Te Pāti Māori also announced a tax policy recently that would see GST removed from all food.
A Herald analysis shows removing GST from fruit and vegetables would financially benefit higher-earning households far more than the lowest-income houses. Wealthier households spend almost five times as much on fruit and vegetables GST than lower-earning households.
The Herald has used the latest data from the Household living-costs price index to estimate the amount of GST spent by different household types on fruit and vegetables.
The Household living-costs price index uses household expenditure data to estimate how much different households spend on a range of goods and services. It tracks both the cost of food and the amount spent across 13 different groups, including both low and high-income households, beneficiaries and pensioners.
In the second quarter of 2023, the average New Zealand household spent $2243 a year on fruit and vegetables. Of this, about $293 was GST.
On a weekly basis, this equates to paying $5.63 in GST on fruit and vegetables.
At the top end of the Stats NZ household income scale, the highest-earning households spent $11.21 per week on fruit and vegetable GST.
However, the lowest-earning households spent only $2.21 weekly, or $115 per year, fruit and veg GST.
Beneficiary households spent, on average, $2.66 per week, or $138 per year, on fruit and veg GST.
“If [lower income households] spend $10 on fruits and veggies, rich people spend $20 … Who will be benefited more? Rich people,” Dr Ranjana Gupta, senior lecturer in taxation at Auckland University of Technology (AUT) said.
“Whatever saving will be there … rich people will get more saving [because] they will buy more … not the low-income earners.”
Gupta was also concerned retailers and supermarkets would not pass on the lower prices to customers, instead absorbing the benefits into their own margins.
If the benefits were indeed passed on, then this would mean people would have additional money to buy more healthy food, she said.
However, there were other options to help those struggling most with the rising cost of food, such as providing vouchers to redeem GST spent on fruit and vegetables, she said.
Although higher-income households spent significantly more on groceries each week, the amount lower-income houses spent was a larger proportion of their total spending (3.3 per cent) than the highest-earners (2.7 per cent).
That means although lower-income households spent more of their weekly budget on fruit and vegetables, they will likely receive smaller benefits from any policy to remove GST from fruit and vegetables than those that spend more at the check-out.
When Willis, National’s finance spokeswoman, revealed claims she had been leaked details of Labour’s tax policy, she warned the move would hand millions to some of the country’s largest and most profitable companies who would fatten their margins.
The cost of fruit and vegetables has risen sharply recently due to domestic and global pressures. In the year to June 2023, for example, kumara – a diet staple for many New Zealanders – increased 172 per cent to $11.18 per kilo.
Locally, supermarkets have come under pressure for their prices. Last year, the Commerce Commission concluded competition in the supermarket was not “working well” and recommended a code of conduct of suppliers to improve transparency.