Venkat Raman
Auckland, August 13, 2023
Labour Party Leader Chris Hipkins has offered to remove GST from fruits and vegetables and increase payments to Working Families from April 1 next year but his proposals have drawn more flak than appreciation both from opposing politicians and common New Zealanders.
National Party Deputy Leader and Finance Spokesperson Nicola Willis said that the proposed (GST) change is worth less than a kumara.
By his own estimates, Mr Hipkins believes that taking off GST (15%) from fresh and frozen fruits and vegetables will help people save $4.25 every week based on an average spend of $32.50 on these items and an increase in Working for Families Tax Credit will help about 160,000 families save $25 per week. The general comment is that these are too little, too late.
These promises are of course election baits and may eventuate from the next financial year, provided that Labour is able to return for a third term after the general election on October 14, 2023.
Ten Point Plan
Mr Hipkins unveiled a ‘Ten Point Plan’ in Lower Hutt this Morning, which underlined Labour’s earlier promise of ‘No Tax Cuts’ or ‘No Capital Gains Tax.’ There is widespread scepticism on the latter.
He said that food prices were about 10% higher in July 2023 compared to the same period last year (although according to Statistics New Zealand, the rise in food prices was the highest at 18% for the year ended March 2022), prompting people to choose cheaper and less healthy alternatives.
“Inflation is tracking downwards, including food price increases, but food is always a big cost for families so this is a good policy for today and the future. Australia and many other countries have taken fruits and vegetables off their GST list,” he said.
Deputy Prime Minister and Social Development Minister Carmel Sepuloni claimed that the income boost will deliver targeted meaningful cost of living support to around 160,000 low and medium-income working families.
“We will also lift the Working for Families abatement threshold by more than $5000 to $50,000 from April 1, 2026, to ensure working families keep more when their pay increases or they pick up extra hours,” she said.
The Proposal with Examples
Mr Hipkins gave an elaborate outline of his Party’s proposal to increase the Tax Credit for Working For Families.
Example One: A couple with three children with one parent working full time on the median wage of $61,997.90 and one parent working part-time (20 hours) on the median wage pro-rated at $30,998.90; Combined household income of $92,996.80
They will save $5 extra per week on GST and receive $25 extra per week as WFF (to be increased to $38 from April 1, 2026); $30 extra in their pocket from April 1, 2024 and $68 from April 1, 2026.
Example Two: A Couple with full-time jobs, earning $65,000 and $50,000 with four children. Combine income of $115,000
GST: About $5 extra per week; WFF: $25 extra per week (plus $38 from April 1, 2026); $30 extra in their pocket from April 1, 2024 and $68 extra from April 1, 2026
Example Three: A single parent earning $84,000 on a full-time job with one child:
GST: $5 extra per week; WFF: $17 extra per week (plus $38 from 2026); $22 extra in their pocket from April 1, 2024; $60 extra from April 1, 2026.
Example Four: A single parent working full time on the median wage of $61,997.90 with two children: GST: $5 extra per week; WFF: $25 extra per week (plus $38 from April 1, 2026); $30 extra in their pocket from April 1, 2024 and $68 extra from April 1, 2026
A good step but not far enough
Dr Pushpa Wood, Director of the New Zealand Fin-Ed Centre of Massey University based in Wellington, is an expert on family finances and has a deep insight into the working of an average New Zealand family.
She said that the proposed removal of GST does not go far enough and would not help many people.
However, families that are struggling to put food on the table and those reportedly ‘buying now and paying later’ may welcome the policy on GST.
Gopal Ayyar, Director of Quality Business Solutions, which services a large number of small businesses and individuals, described Mr Hipkins’ proposal as an election gimmick.
“Removing GST on just fruits and vegetables is a welcome decision but the Labour Party has said that it is a counter-offence to National’s Tax Policy. In short, there will be no impact,” he said.
Mr Hipkins lashed out at critics saying that those opposing the proposed changes are people who are not worried about their weekly food bills.
“This policy is aimed at New Zealanders for whom every dollar at the checkout matters. In fact, the tax changes will benefit all New Zealanders. People with lower incomes spend a higher proportion of their earnings on fruits and vegetables. Tax costs cost a lot more but do not give New Zealanders a lot more,” he said.
Dr Wood hoped that the removal of GST on fresh and frozen fruits and vegetables will mean that people will not be using the buy now, pay later method.
“As a nation, we need to look at our low wages, rising food prices and overall living costs in this mix, if we are really serious about lifting the economic status of our communities,” she said.
Mr Ayyar said that the Labour Party targets voters who earn less than $70,000 annually, single parents and people with many children.
“As such Mr Hipkins and the Labour Party have given the green signal for a progressive section of the population to migrate to other countries (especially Australia) or rot in New Zealand,” he said.
According to Mr Ayyar, there is a ‘hidden racial profile in the proposals.
Miserly Offering: Willis
National Party Deputy Leader and Finance Spokesperson Nicola Willis slammed the GST proposal as ‘a miserly offering that will do very little to help families suffering through the cost of living crisis.’ “But it will have supermarket owners rubbing their hands with glee. Kiwis are being smashed by a cost of living crisis that has dragged into its third year and the best Labour has to offer is a tax change worth less than a kumara. Labour is foolish to suggest supermarkets will pass all of this reduction on to shoppers,” she said.
Ms Willis said that a National government will eliminate the middleman and enable people to enjoy the benefits of income tax reduction.
Disastrous Treachery: Seymour
According to ACT Party Leader David Seymour Labour’s latest offering is a ‘disastrous treachery.’
“Over six Budgets, Labour has increased the government’s annual tax take by $43 billion, annual spending by $50 billion and borrowed a net $121 billion. Today they confirmed that disastrous trajectory will continue with a so-called tax policy that reveals that they are out of ideas,” he said.
Mr Seymour accused Labour of mutilating the world’s best and simplest GST system and attacked its Working for Families proposals as ‘minor adjustments.’
“Some will get $25 a week that does not keep up with inflation, while others will get nothing at all. Labour’s tax policy will reduce tax by $850 million a year, against a backdrop of increasing the tax take from $80 billion in 2018 to $123 billion this year. If you do not benefit from the $25 a week extra, then you are just paying lots of extra tax. If you do, you are not keeping up with inflation; that is driven by wasteful government spending,” he said.
Mr Hipkins said that New Zealanders now have a clear choice in this election.
He said that millionaires and chief executives will get huge tax cuts under National but relief at the checkout (of supermarkets) and support for working families.
Ms Willis said that a government under her Party’s leadership can be generous.
“National will stop the policy band-aids and instead strengthen the economy so we can reduce the cost of living, lift incomes for all and deliver the public services New Zealanders deserve,” she said.
The choice is getting clearer every week, Mr Seymour said.
“A coalition of chaos that wastes money by the billions or us. ACT is the only Party with a fully costed alternative budget that lays out how wasteful spending would be gotten under control so meaningful tax cuts could be made,” he said.
Dr Wood called for a targeted, long-term and well-planned approach.
“All these promises have a cost,” she said.
But she asked, “Is this enough to help struggling families?”
“Is this permanent or something that might change once the election is over? I still cannot help but think that one size fits all type of support that is being offered needs to be re-examined at some stage,” Dr Wood said.
