I’m astounded at today’s Fairfax Media poll that suggests almost 3 out of 4 Kiwis think removing GST on food is a good idea. If it is just a reaction to 9 years of unchanging taxation combined with climbing living costs, then it does make some sense.
However, removing GST on food would have to be one of the most counter-productive “solutions” we could come up with for the problems and pressures New Zealanders are feeling today.
Petrol, mortgage/rent, and food form the core of most families’ expenses and all three have risen higher than wage growth for a number of years. Voters also feel overtaxed. They probably should. Govt spending has been of a quality which doesn’t match or justify the current level of taxation (but that is just an opinion of this one voter).
Throw in a resurgent National with this as their main election plank and a finance minister making their job easy and we have today’s situation. I honestly do think that Cullen has good intentions (like Muldoon), but he’s just the wrong person for the job (like Muldoon). Thankfully Cullen likes to horde and spend rather than spend and bankrupt (like Muldoon).
The first problem with removing GST on food is that it’s a really lousy way of helping those who need help the most while reducing revenue for the Govt. It is much more efficient to tax them less in the first place rather than change the rules of GST. This leads directly onto the next problem.
If we remove GST on food, we break the simplicity that is our GST. This would raise compliance costs significantly and this really should be reason enough. Personally I think GST is probably the most efficient and effective method of taxation we have. Businesses know how much money they’ve earned and they know how much they’ve spent – it’s easy to calculate and plan for GST payments. In fact, in my dream world GST would be raised and be the only form of taxation (encourages saving, encourages exporting, Govt revenue tied even more closely to the current health of the economy, etc).
Lastly, if we break the “rule” we have of almost no exceptions to GST then we’re at the mercy of future politicians pandering to voters to exempt further items from GST. What’s next? Would, for instance, the Greens say we should exempt GST on NZ-made goods to further their buy NZ campaign? Would United Future say we should remove GST on anything child-related as part of their focus on families? It would be a rather slippery slope that would only end in higher compliance costs and higher taxation in other areas.
I hope our politicians show some leadership on this point and refuse to make it an issue or to consider it a real option to better the lot of New Zealanders, well-off or not. I’m very interested though, do 3 of my 4 readers think it’s a good idea too?