Tax experts respond to GST-free fruit and vegetables: 'Populist' and 'stupid' : politics

[–] absGeekNZ 7 points 1 year ago (1 children)

An interesting article. Shitty click-bait headline.

A good portion of the responders make the "slippery slope" argument; i.e. if we open this hole then there is a temptation to complicate the GST system more. This is a poor argument and a fallacy for a reason; one thing does not necessitate another.

There are some really good points though, a couple of responders make the argument that middle to high income earners spend more on fruit and veg, thus the bulk of the benefit goes to those already on higher incomes. Now this is a great argument against changing GST; targeted tax relief or subsidies would be much more tax efficient and have the effect of helping those in need.

Another really good argument make is about the compliance costs of taxation; these are "dead weight losses", costs that give you nothing in return, complicating the GST system, even a little, increases compliance costs is a terrible idea. Eric Crampton made a epic point,

only Hungary collects about as much revenue out of its consumption tax relative to GDP as New Zealand does - and their consumption tax rate is 27 percent.

I'm not sure how complicated the VAT/GST system is in Hungary compared to our world-leading simple GST system but it is certianly interesting.

Overall I was ambivalent about this policy as it would not really effect me much; I am in that mythical middle-to-higher income bracket; I would see a few dollars a week less on the grocery bill, but it would not materially effect my life. I assumed (bad move) that the policy was well thought out and had been vetted.....turns out it is probably not. I also assumed that the anti-crowd were just the usual anti-Labour "we hate it because you said it group".

This article has swayed me from "I don't care" to "this seems like a bad idea".

@Ilovethebomb@lemmy.world thanks for the post. A well thought out article.

[–] Rangelus 2 points 1 year ago (3 children)

The problem with GST is that it is regressive. It affects lower income households more than higher income households. It is "fair" in the sense that everyone pays the same %, but it is also "unfair" for the same reason we have a progressive income tax model.

Lower income households spend more of their income, as a %, on food. Anything which lowers the cost of food is good, in my opinion. Also, fresh produce is often more expensive than less healthy options. Anything which encourages a healthier diet is good in my opinion.

I agree it's not perfect. I agree a different approach might have a greater effect for lower income households. But if the choice is between this policy and nothing, which National is running on, I will take this one.

[–] Dave 4 points 1 year ago (2 children)

The problem of GST is it's regressive, but the benefit is that tourists pay it (unlike income tax) so we can use a lower rate.

I do wonder if a tax free threshold on income tax would create a better impact (affecting all equally instead of those that can buy more getting a bigger benefit), and would have much less administrative burden.

I'm starting to wonder if this is just an excuse to crease a commission to monitor the supermarket industry, which I think is a good thing.

[–] Rangelus 5 points 1 year ago (1 children)

I also think restructuring the tax brackets, including a 0% tax bracket, is something that is sorely needed. Adding a tax free threshold of, say, $20,000 would make a huge difference for those on minimum wage.

[–] Dave 4 points 1 year ago (1 children)

I'd think the easiest would be to just update the lowest tax bracket to 0% (I think this is under $14k?).

If we are going to change a bracket to $20k, then let's do an across the board update (e.g. 0% under $20k, 20% under $70k, 30% under $150k, 40% for $150k and up - I just made these up on the spot, they would need to be properly balanced against expected revenue by a working group).

But if we're just going for a quick election bribe, make the $14k and under bracket 0% and leave the rest.

[–] Rangelus 4 points 1 year ago (1 children)

In my perfect, dictatorship world, I would do both. I would find some value that fits the "bare minimum" income someone could make. This could be 0.5FTE at minimum wage, for example, and set that as 0%. I would then fix the tax brackets to inflation, add an extra bracket to the top 1-2% income earners. I would lower GST back to 12.5%, enact a CGT (which I prefer over a wealth tax if it targets assets), and tinker with teh rest of the tax code to close as many loopholes as possible.

[–] flambonkscious@sh.itjust.works 2 points 1 year ago

You guys win my vote for PM!

[–] absGeekNZ 4 points 1 year ago (1 children)

It seems to me that this could be much better achieved by targeting the people who need it most rather than a blanket reduction.

The article (in the other post) states that approx $4 will be saved on $30 of zero-rated goods, this isn't a great starting point but none the less it is what I am going to use. If we assume that on average $4/week for every household will be saved, that is $4/week that the isn't being collected by the government per household. Wouldn't it be better to keep collecting that $4/week of 100% of households and funnel $40/week to the 10% of households that are in need?

I believe that targeted programs are far more effective then generalist ones; obviously the numbers are very vague, but for the top 50% of the population the $4/week will not be noticed, but I guarantee that $40/week would be noticed by the bottom 10%. Obviously the net is that the bottom 10% are $36/week better off. Everybody else is at the same position as they are now.

[–] Dave 2 points 1 year ago

Often targetted programmes miss those who truly need it. A common example given is free school lunches. If the whole school gets free lunch then the kids that really need it are more likely to get what they need, rather than only offering it to students that can prove low income.

Another example is unemployment benefits. Homeless people often don't qualify because they don't have a bank account (and can't get one without an address), so miss out on support they sorely need.

With that said, GST exemptions benefit people with more money more than they benefit people with less money, so it's not great from that perspective.

[–] absGeekNZ 3 points 1 year ago (1 children)

That is a fine point, bad but positive is better than nothing or negative.

I guess I am ideologically inclined to good and positive; i.e. targeted programs that use tax dollars to achieve the desired result rather than maybe helping some people a little bit, but we could never measure it so lets call it a win.

[–] Rangelus 3 points 1 year ago (1 children)

Absolutely, I'd be much happier with different policies. I think Labour is being frustratingly tentative, and I genuinely don't understand why. I think this approach will cost them the election.

My view on this specific policy is there must be some benefit to it. Not only is it implemented all over the world, but I don't believe politicians make these decisions in isolation. There will be some reason why this policy, specifically, has been chosen over any number of other ones. It might not be a good reason, but there will be one a reason.

[–] absGeekNZ 3 points 1 year ago (3 children)

As someone pointed out on another discussion; this is basically a one-way policy decision. Once implemented it is effectively impossible to reverse; so at some point in the past to win votes, a party promised this policy.

Once the policy is implemented it doesn't matter how bad / good it is, removing this is a guaranteed vote loser. No party can afford to remove the policy. So it never gets removed and proliferates across the world, and worse people start looking at the prevalence of the policy as a reason to implement it.

Complicating the tax code is almost always a really bad idea, increasing compliance costs for businesses will be passed onto customers. How does the policy effect cafes, restaurants and other food prep places?

What about movie theaters, do dried popcorn kernels attract or not attract the tax cost? After they are popped they do since they have been heated, so the customer bears the GST cost but the cinema buys the "raw" ingredient tax free. Are there going to be differences between "naturally" air dried vs oven dried kernels? How much court time is going to be wasted on these kind of questions?

This was literally the first example I thought of, there will be a huge number of extra edge cases that this policy will have knock-on effects, this just means that things will get more expensive, probably not 15% more but, it will be there.

[–] Rangelus 5 points 1 year ago (1 children)

@Dave@lemmy.nz has already addressed much of your concerns, so I will only add the following: A lot of this discussion is about possible problems, without seeing the legislation fully written out. You, and others, are assuming that there are guaranteed to be all kinds of problems, without the actual text to point to and say "what about this?". The point that other countries have enacted this policy without any, or too much, trouble should give you pause for thought that it is possible.

The point about being unable to remove it is a valid one, and one I share. However, as I (so far) feel this policy is overall positive, I am fine with it. As I said earlier, I think this policy addresses more than just adding a bit of money to your wallet each week. See this Auckland University Law Review article from 2019, which discusses the implementation in other jurisdictions and comes to the conclusion that zero-rating food is a net-positive policy. They also, rightly so in my opinion, point out:

New Zealand has the advantage of being able to improve on the models of other jurisdictions. This article proposed certain exclusions from New Zealand’s GST base by zero-rating and how these provisions can be structured so as to avoid the problems faced in other jurisdictions. As with the original GST regime introduced in 1986, New Zealand can design zero-rating provisions to lead the world by example. The current New Zealand GST system is widely regarded as a highly effective VAT around the world. This reputation can be maintained if food and menstrual products become zero-rated by ensuring that legislation is carefully implemented.

Just to make it clear, my issue is not with valid criticism, but with a general dismissal due to perceived potential problems that might arise. For example, if someone can show that this policy would not be net-positive for income and health, or that it would harm vulnerable people, then I would naturally change my view.

Finally, I don't buy the slippery slope argument at all. I think this policy should be judged on its own merits, and not with the background of "oooh they might make it EVEN MORE COMPLICATED!".

[–] eagleeyedtiger 1 points 1 year ago* (last edited 1 year ago)

Just to make it clear, my issue is not with valid criticism, but with a general dismissal due to perceived potential problems that might arise.

Finally, I don’t buy the slippery slope argument at all. I think this policy should be judged on its own merits, and not with the background of “oooh they might make it EVEN MORE COMPLICATED!”.

God this is so common with any online political discourse, especially in here in NZ. Everyone starts thinking up all these potential issues and nothing ever changes. It also tends to reveal a lot of their biases. It's fine to be concerned about the potential impacts of policy, and even better to plan for it. But doing nothing because almost everything has potential for some negative situations is ridiculous. Nothing any government will ever do will be perfect off the bat and have no edge cases. "Perfect is the enemy of good" and all that.

So many just jump straight to thinking up negative scenarios rather than trying to imagine what potential positive outcomes there could be, which we could then improve upon.

[–] Ilovethebomb 2 points 1 year ago

Only the end consumer pays GST, not a business, so the theater doesn't pay GST regardless.

[–] Dave 2 points 1 year ago

I like the sentiment but just want to point out something about how GST works. GST is a consumer tax, so for this:

After they are popped they do since they have been heated, so the customer bears the GST cost but the cinema buys the “raw” ingredient tax free.

The cinima is already buying popcorn GST free. Only the end consumer pays GST.

A better example might be a cafe that sells raw apples or bananas, but everything else is "processed" so they would have to do a software update for the sake of one item in the store that not that many people buy.

[–] Ilovethebomb 1 points 1 year ago (1 children)

I'd prefer to see the level of GST lowered, myself. Once this is enacted, it will be difficult to undo.

[–] Rangelus 1 points 1 year ago

I am a big fan of reducing GST across the board, absolutely. As a regressive tax, lowering GST in general should help low-income households a lot.

[–] master5o1 4 points 1 year ago (1 children)

It would be a better policy to simply lower GST rate than to create and set the precedent of exceptions.

[–] Rangelus 1 points 1 year ago (1 children)

And yet many countries remove VAT from produce without any issues at all. I wonder why it is such a catastrophe here.

[–] Ilovethebomb 0 points 1 year ago (2 children)

Do they though? Are there any countries who do this, and haven't had court cases over weird edge cases?

[–] Rangelus 1 points 1 year ago (1 children)

Well a quick search turns up nothing, but I think a better source his this 2019 review from AU Law Review which found the benefits of zero-rating produce outweigh any potential problems. It even mentions that is is successfully done in many other countries.

[–] Ilovethebomb -1 points 1 year ago (2 children)

That's a big step back from "no issues at all", isn't it?

[–] BalpeenHammer 3 points 1 year ago

Did they have court cases and if so did the court cases somehow harm the economy or the population in some way? I find it odd that you would oppose any law because somebody might file a court case. That seems batshit crazy to me. Virtually every law is eventually tested in the courts.

What a bizarre statement.

[–] Rangelus 2 points 1 year ago (1 children)

I stand by my statement. To the best of my knowledge this exists in many countries without problems.

Of course there have been issues in some countries, but notice I did not say all countries did I?

Further, I see you completely ignored the article and instead chose to pick on semantics.

[–] Ilovethebomb -1 points 1 year ago (1 children)

To the best of my knowledge this exists in many countries without problems.

Which countries, then? Where has this been implemented where it hasn't cost them an absolute fortune in legal fees and added admin costs?

Or are you just making shit up?

[–] Rangelus 2 points 1 year ago* (last edited 1 year ago) (1 children)

Canada.

Since you only provides a single example I only need to do the same. Or are you making shit up?

[–] Ilovethebomb -2 points 1 year ago (1 children)

Look at that, cases over weird edge cases.

Another court case.

Oh look, another one.

Starting to think this will be an expensive pain in the ass.

[–] Rangelus 3 points 1 year ago

None of those have anything to do with food exemptions. We have been specifically talking about zero-rating produce. No-one is arguing that we should start zero-rating other things, or that certain jurisdictions have complex tax code.

You, and others, are trying to argue that GST exempt produce will be frought with troubles, but the only example you have provided is that one court case in the UK.

[–] eagleeyedtiger 1 points 1 year ago* (last edited 1 year ago)

I don't think there is anyone who has compiled a list of specifically those that have removed it from produce, however if you look at this table on Wikipedia: List of countries by tax rate, you'll see that many of them have variable or reduced rates in the "VAT or GST or Sales Tax" column. You'd have to look into each country to see what their reduced rate applies to.

So quite a few countries have managed to make it work it would seem

[–] Ilovethebomb -3 points 1 year ago

Shout out to the one salty sad sack who downvoted this without saying anything. 👍

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