Scrapping GST on fruit and vegetables may poll well, but it has some powerful critics – and it didn’t go so well for Phil Goff.

Should we remove the GST from fresh fruit and vegetables? At first glance it seems straightforward. Yes. Clearly. What kind of monster wouldn’t want fresh fruit and veg exempt from sales tax?

Yes was the resounding answer in a poll conducted for Newshub by Reid last year. The question was on GST for food, and 77% said get rid of it, with just 19% saying leave it alone. No doubt the focus groups are sending a similar message, and according to purported intel from somewhere in the Labour policy machine, ditching GST from fruit and veg is the plan for the 2023 manifesto. 

It’s tempting to suspect that the leak was a kite-flying exercise: Labour putting it out there for a mood test before making the final call. Were it that, however, they would have chosen someone other than the opposition spokesperson to feed the idea to. 

The response to Nicola Willis’s claim has been instructive, however – affirmed, it appears, by faint denial. And the case for removing GST from fresh produce is compelling. Especially when there is a cost of living crisis. Especially when you’re determined to underline your focus on people’s basic, everyday needs. Especially when supermarket produce areas are full of jaws slackened at silly prices. 

Versions of the carve-out exist overseas. In the UK and Europe most food and drink is sales tax or VAT free. You pay no GST on most foods in Australia, while similar exemptions exist across most states in the US. Similar proposals are backed by Te Pāti Māori and NZ First. 

The case against

The opponents of the idea, however, are many, from Brash to Baucher to government-commissioned tax working groups in 2009 and 2019. They variously point out that scrapping GST on food would complicate the tax system, particularly for small businesses, and that there are much more effective mechanisms, if the goal is to support people who are struggling, than a tax exemption that saves the rich more than the poor. All that, and it can be fiendishly difficult to define what meets the criteria, or even whether retailers would pass on the savings to consumers. 

Among the critics of recent years is David Parker, who recently stood down as revenue minister. In 2013, the then deputy opposition leader agreed with a reporter’s proposition that to have removed GST from fresh produce would have “opened exploitable and confusing loopholes, and dirtied an otherwise clean tax”. 

And Grant Robertson, who last year told a business audience: “GST is a comprehensive tax which makes it very easy to administer and people in the room who’ve been in other countries with more exemptions will know it becomes an absolute boondoggle to get through.” 

He added: “If you do it off fresh fruit and vegetables, or even staple products, then you get into an argument of what’s the difference between beetroot and canned beetroot, and if you want to make a real impact on the lowest income people you wouldn’t cut the tax off fresh beetroot – that’s not what people on low incomes buy.”

Despite all of those arguments, not least from senior Labour ministers who would be harangued around the U-turns, Labour appears determined to press ahead. There’s an election on. But so there was in 2011, when Labour tried something similar. How did that go?

‘Show me the money’

John Key’s favourite movie is Johnny English, but he must have a soft spot for Jerry Maguire. It provided him with the line he threw at Phil Goff in 2011, a line that stuck. Towards the end of the Christchurch Press debate, Goff was talking about the promise to remove GST on fresh fruit and vegetables. “Show me the money,” John Key declared, pointing across the stage at Goff. “Show me the money. It ain’t there son.” It was a “horror show” for Goff, reckoned the Herald’s John Armstrong, and very likely a “defining moment”. 

The attack in this case was less about the GST thing specifically, and more about Key pointing to a “$17.2 billion hole” (forerunner to the more famous $11.7 billion fiscal hole of 2017 vintage) in Labour’s promises, which as well as the GST pledge included an income-tax-free band up to $5,000 (both were dropped before the 2014 election) as well as a new capital gains tax.

“It became like a vaudeville routine, that the audience were starting to mutter in time with Key’s mock exasperation, ‘Where’s the $14 billion coming from?’ observed Stuff’s Vernon Small after the Christchurch debate. “It is increasingly looking as if Labour has made a major tactical blunder by holding off releasing its full fiscal costing, leaving Goff exposed.”

Goff and his finance spokesperson of the day, David Cunliffe, did come under pressure over the policy. They were quizzed over why frozen or canned vegetables, often just as nutritious and in many cases more affordable than the fresh stuff, were not included, about whether it really helped people on lower incomes most, and about legal fights abroad relating to the complexities of what met the criteria and what didn’t. But that alone was hardly catastrophic; the problem was in being caught up in a tax package that Key could declare sloppy and uncosted. 

Goff would soon present a spreadsheet to show his numbers were sound, including a statement headlined – those were the days – “John Key is a monkey’s uncle”, but the damage was done. That risk remains a live one today, and may explain both National and Labour delaying their tax plan announcements. It was reinforced yesterday by the scuffle over CTU calculations of a multi-billion-dollar shortfall in National promises, which the party dismissed as a “partisan hit job” rather than addressing in substance, all of which adds to the case for an independent policy costings unit, but that’s another story. 

Reflecting on the 2011 campaign in the post-election book Kicking the Tyres, Grant Robertson didn’t mention the GST policy, but acknowledged the Christchurch debate “did knock us”. He wrote: “A country worried about the economy, and just starting to emerge from World Cup euphoria to think about the election, was presented with a sound bite – John Key’s jibe at Phil Goff to ‘show me the money’ – that fed their worries.”

Boondoggles and beetroot

Fast-forward just over a decade, and Robertson as finance minister reluctantly accepted Chris Hipkins’ decision to kick the idea of a different tax switch, one that involved a new wealth tax favoured by Robertson and then revenue minister David Parker, all the way past the long grass and into the ocean. “I’m a team player,” he said.

Robertson is now preparing the soil to explain his embrace of the GST carve-out. “I’ve been around a long time and I’ve seen politicians of all shades have to deal with things you don’t always necessarily 100% back at the start, it’s the nature of being here,” he said yesterday.  

Quizzed later in the house on Boondoggles and Beetroot (as a chapter heading in any future autobiography is obliged to read), Robertson welcomed the fresh currency for the excellent word “boondoggle”, noting that a number of successes in the past had once been so described, such as the Sydney Opera House and the Hubble telescope. 

As for beetroot, he said this: “My father used to put beetroot on scones, Mr Speaker, which is not something I would support New Zealanders doing.” There are few more eloquent orators in New Zealand politics than Robertson, but as Labour pivots to scrapping GST on fruit and beetroot, tempts the ghosts of 2011 and rolls the boondoggle dice, he has his work cut out for him in explaining how he is not swallowing a rat, so much as a delicious and suddenly more affordable ratatouille.