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Thursday, April 29, 2010

GST off water

There has been a lot of criticism of the Maori Party's attempt, by way of a private members bill, to get "healthy food" exempted from GST. There is - unfortunately - just as much merit in the criticism of the complexity and perverse outcomes the bill would produce as there is merit for the central idea behind it that healthy food should be cheaper than overly processed unhealthy food. For this reason I have suggested that water alone (not even in the bill!) should be exempted. As we can see by the exhaustive Australian list of exemptions - from milk, tea and coffee to penile clamps and everything in between in this part of the list - the system gets very complicated and confusing. The one item that stands out as being very clear however is water:
And I note another code for it here: It appears that bottled water is also exempt:But this must be under another code because there is a tax ruling on water at the ATO which gives more detail, but I suspect this is for reticulated supply issues (it also includes sewerage) and mentions a 100 litre limit:I dare say it can work in this country too - but for reticulated or bulk supplies only to keep it simple and to align it with similar human necessities that are not taxed in NZ, viz: rent.

The next similar class of charge to have removed from the ambit of GST are the Council rates - but that's an Act job.

[UPDATE: A commenter has said that it was United Future - whose sole MP is (always) the Revenue Minister - that had a policy of removing GST from rates in a previous election: "No tax on a tax". I have found nothing on their site to confirm that this is still their policy however, they seem to be silent on it. But it definitely seems to have been a policy. A private members bill from his own caucus member was put up on this exact issue. And this question from another UF MP in 2004:Where's the love now? What's the point of being the Revenue Minister if you can't even implement your own party's commonsense policies that specifically relate to Revenue? What is the point of Peter Dunne? --]

The Crown's budget is delivered on the 20th of May. If GST does go up to 15% there must be some trade-offs for the support parties that are bound to vote for it.


At 29/4/10 1:05 pm, Anonymous Anfield1973 said...

I recall the billboard for united future - NO TAX ON TAX, WE WILL TAKE GST OFF RATES.

Helen just made him revenue minister and that sorted that promise.

No increase in excise on booze - but there will be a 2.5% tax hike

At 29/4/10 2:58 pm, Blogger Bomber said...

Gordon Campbell has already pointed out that GST can be taken off healthy food - http://werewolf.co.nz/2010/04/do-the-right-thing/

At 29/4/10 7:32 pm, Blogger Tim Selwyn said...

I will point these things out about Gordon Campbell's article:

He says:

"a major New Zealand research study released in March has proven that if supermarket customers were given a 12.5 % price discount, an almost dollar for dollar higher investment in healthy food will result, and will be still observable six months later."

- but does not link to this study that has "proven" this (he discusses it in detail however - and I will mention it too - below). He links to other things, but not to this. My guess - and I'm not linking to my research either - is that the savings on the GST exempt food will be off-set by increase purchases of the "bad" food. I'm not going to buy two cabbages instead of one now the GST is off, I'm more likely to keep buying a single cabbage and use the savings to buy a chuppa chup. And as others have pointed out the fresh veges at the supermarket are sometimes two or three times the price of other outlets, so the impact will be negligible when shoppers are being ripped off like that anyway. Thus, his conclusion:

"Cutting GST on food in other words, would will result in lasting health benefits."

- is dubious. People will use the slightly cheaper prices to cross-subsidise their purchase of the unhealthy foods.

He says:
"Today, the food exemption is not a factor on the political landscape across the Tasman at all."

- this is an irrelevant, even a self-defeating argument. So what? - that doesn't make it right, or wrong. At the moment the same acceptance can also be claimed for our current GST system... and yet he wants to change it. What he is presenting as an argument is that the status quo is largely uncontested and therefore it is OK. That is not convincing. Especially in the case of Australia where they went from a highly complicated system to a less complicated one: in comparison with what they had before - their experience - yes, of course it is going to be seen as relatively uncomplicated, but they may prefer our system that is even more uncomplicated if they tried it. We don't have businesses having to rely on computerised models etc. Probably his weakest argument.


At 29/4/10 7:33 pm, Blogger Tim Selwyn said...

He says (doesn't link, but says):

"The Medical School study of 1,100 shoppers split them into four groups for purposes of comparison: people who got a price discount of 12.5%, people who got the same price discount plus nutritional education, people who received just the educational information, and finally, those who got neither.

Their shopping habits were then compared, over an extended period of time : not from what they said they bought, but from their actual dockets at Foodstuffs and Pak’n’Save. The purchases that were studied were limited to the 3,000 top selling items on the industry’s Shop’n’Go computerized product catalogue, and these were matched, for nutritional evaluation, against 1,000 items from the Heart Foundation’s “Pick the Tick” roster of healthy foods, which are essentially defined by their tolerable levels of salt, sugar and fats. “Edam cheese gets in,” survey head Professor Tony Blakely of the Medical School explained, “but not mild or tasty, because of higher fat. We weren’t looking for total avoidance, but looking for the healthier options. Green milk got in, blue milk was out.”"

- Milo also had the tick too at one time, so what? He's not saying what the 12.5% discount was on either - everything, or just things with a tick? This is a crucial point - as everything turns on it - and yet it is not clear. He's confusing things and that's just poor journalism, really poor. I will assume that the discount in the study only applies to the ticked items.

"The main findings from the survey? People, Blakely explained, kept on buying almost the same amount of saturated fats, regardless of the price and regardless of the educational material they were given. However, they used their 12.5% price discount to buy a significantly higher amount of healthier foods, and were still doing so at the end of the survey. Education alone made little or no impact.
“It all came down, he agrees, to the price elasticity demonstrated by the study. Because the 12.5% price reduction produced an average gain of 11% in the purchase of healthy food ? “That’s right. So if you divide one by another, you’re getting towards a ,85 price elasticity. It was almost dollar for dollar.”"

- If the shoppers were told that everything with a tick has a 12.5% discount (Milo, watery milk etc.) then it is not such a big surprise what happens given the substitution choices at a supermarket. The overall effect was that shoppers bought 11% more of the ticked items - and only a few % more on the unticked items. It only works - from a health angle - if the ticked items displace the unticked. That isn't "proven" - it might even suggest that the meal portions are larger (which is probably not a healthy outcome). This study is rather underwhelming as is the article.


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