Following Labour leader Phil Goff’s confirmation yesterday his party will remove GST on fresh fruit and vegetables if elected later this year the New Zealand GST landscape has changed significantly.

Since 1986 when the Labour Party first gave us GST there has been bi-partisan agreement with the desirability of keeping a single rate broad-based system. That’s all changed now Labour has committed to moving away from a feature of our system’s design which is admired around the world.

As our standard GST rate crept up I guess it’s not surprising pressure mounted to have exemptions, especially given the regressive nature of GST. We have the 5th highest GST rate on basic food in the OECD. Most countries use a reduced or zero rate for basic food so it was probably only a matter of time before we could no longer resist the pressure.

I wonder though whether this could be a taste of things to come. Once politicians gain an appetite for multiple GST rates following Labour’s lead could we see greater use of this policy tool? Surely it will be tempting to impose higher rates on luxury goods for example as a means to bolster depleting tax collections?

So, who likes Phil Goff’s policy of removing GST on fresh fruit and vegetables?

Iain