'We won't support GST removal' - PM

A bid to remove GST on healthy foods to lower costs has been slammed by the Government.

Prime Minister John Key said the Government will not support Maori Party MP Rahui Katene's bill, which defines healthy food as fruit and vegetables, breads and cereals, milk and milk products - excluding ice cream, cream products, condensed and flavoured milk - and lean meat, poultry, seafood, eggs, nuts, seeds and legumes.

The Government would not support the removal of GST on particular items, he said.

"In our view, what makes the system work well is the simplicity and its low administration costs. Once you start exempting one part, meat and vegetables, then why wouldn't (you to) other parts of the food equation."

"We've compensated for GST through personal tax cuts, so we are not going to move on and take GST off food."

The bill says food prices have risen more than 20 percent in the last three years while real incomes have risen only very slightly.

"While all consumers will benefit from the removal of goods and services tax from healthy food, those on lower incomes spend a greater proportion of their income on food and will receive a significant benefit as a result."

Revenue Minister Peter Dunne said the bill would introduce 'healthy food' definitions that would be difficult to categorise.

"For example, what does lean meat mean, as opposed to non-lean meat," Mr Dunne said.

Mr Dunne said it could open the door to others, demanding to be given the same treatment, and it would mean a loss of millions of tax dollars which would have to be found somewhere else.

Ms Katene mentioned a computerised model introduced in December 2009 by the Australian Taxation Office, making GST food and beverage compliance extremely easy to manage.

Mr Dunne said the Revenue Department had not looked into it, "simply because it is not New Zealand's policy to have a non-universal GST.

"When one looks at the experiences of defining some of these items in the Australian and the British context, one sees that we would be extremely unwise to follow suit," he said.

Ms Katene is appealing for her Goods and Services Tax (Exemption of Healthy Food) Amendment Bill to be at least put through its first reading so it can go to a select committee for public submissions.

Labour Party leader Phil Goff said his party would support the bill to a select committee.

"We believe that there is a case to be argued for taking the GST (off) for healthy food like fresh fruit and vegetables that would be both good for nutrition in a nation that's becoming increasingly obese," he said.

Mr Key said passing the first reading would give New Zealanders the false impression "that somehow we are prepared to move in this area, when we are not".

But Ms Katene said she would try again if needed.

"This is too important. This is really a matter of life and death. Eleven thousand people are dying from eating relating diseases, we really need to be doing something about that," she said.

The bill is likely to go on Parliament's agenda for a first reading debate in two weeks.

- NZPA