Health experts back GST-free policy for fruit and veg

Labour leader Phil Goff has confirmed his party would remove GST from fresh fruit and vegetables if elected and the move has been backed by a University of Otago health researcher.

Labour has been running a campaign against the Government's tax package, which takes effect on Friday and includes lifting GST from 12.5 percent to 15 percent, and today's announcement is its first new policy to address cost-of-living issues for low and middle income earners.

Speaking at an event in Porirua north of Wellington, Mr Goff said for many families the tax cuts which also kick in on Friday would be swallowed up by GST and other cost of living increases.

"Labour's scheme to zero rate fresh fruit and vegetables is the first of the policies we will announce over coming months to help families get ahead and to build a stronger economy," Mr Goff said.

"Removing GST from fresh fruit and vegetables will help people on low and middle incomes make up some of the ground they are losing under National."

National has dismissed the idea of taking GST off food, with Prime Minister John Key saying GST worked because it was a simple system.

"We've compensated for GST through personal tax cuts, so we are not going to move on and take GST off food," he said.

He and Finance Minister Bill English maintain most New Zealanders will come out ahead when the tax changes take effect.

Professors Tony Blakely of the University of Otago, and Cliona Ni Mhuchu of the University of Auckland, gave the proposal cautious support as a move to improve health and reduce inequalities. 

"Earlier this year we published research showing an 11 percent increase in purchasing of fruit and vegetables when 12.5% was taken off the price," Professor Ni Mhurchu said.

The finding was from a large randomised trial of 1,100 New Zealand shoppers, and published in the American Journal of Clinical Nutrition. 

This increase equates to about half a kilo more fruits and vegetables per household each week, or about six extra servings.

Mr Goff said it was important to ensure fruit and vegetables did not become luxury items due to their cost, and that price incentives would encourage people to eat healthy food and help tackle obesity.

Labour estimated the loss of tax revenue at around $250 million.

"But given the cost to the health system of obesity-related diseases, the fiscal cost will be repaid many times over in savings to the health system. The tobacco excise increase raises about the same amount."

To qualify for the exemption, goods would have to be fruit or vegetables "and they have to be fresh -- it's that's simple".

Mr Goff said he did not accept Mr Key's claims about such a measure being complicated.

"Evidence from Australia is that it is a relatively straight forward process for retailers, with a small cost initially to implement.

"Many businesses already deal with zero-rated inputs such as rent, financial services, second hand goods and overseas travel."