Prime Minister Chris Hipkins yesterday revealed the party’s tax policy, and has confirmed no changes to income tax levels and no introduction of new taxes such as a wealth tax or capital gains tax.
The In-Work Tax Credit will be raised by $25 a week to $97.50, and the Working for Families abatement threshold will be raised, but not until 2026, to $50,000 to reflect wage growth.
Mr Hipkins said removing GST from fruit and vegetables was "fairly simple" and would come into effect on April 1.
Many low and middle-income New Zealand households would be $30 a week better off next year under the party’s tax policy, Mr Hipkins said.
New Zealand was starting to come out of a tough economic cycle, but acknowledged people still faced challenges, he said.
He acknowledged food was a big cost for families, he had seen families putting items from the supermarket back because the cost was too high, he said.
New statistics released by Stats NZ show food prices rose 1.6% in June on the month before, the biggest monthly rise since the start of the year.
That includes an overall 8.1% increase on fruit and vegetables.
"I can’t control the weather, but I can do something about food prices," Mr Hipkins said as he announced his GST removal off fruit and veges after citing the impact of Cyclone Gabrielle on food prices.
"A lot of the people who oppose these changes aren’t the ones worrying about their weekly food bills. This policy is aimed at New Zealanders for whom every dollar at the checkout matters," he said.
The cost of taking GST off fresh and frozen fruit and vegetables was estimated at $2 billion over four years, while increasing the in-work tax credit and lifting the Working for Families abatement threshold was expected to cost $1.4b over four years.
Labour’s policy document said the changes would be funded by removing the "last remaining large Covid-19 economic stimulus measure" — depreciation for non-residential buildings to support commercial property owners through the pandemic.
Finance spokesman Grant Robertson, speaking ahead of Mr Hipkins, told the 150-plus crowd at the St Paul’s Church in Lower Hutt that finances were tight domestically and internationally, and Labour would keep looking for savings to make things more efficient.
The benefit to low- and middle-income families through changes to Working for Families and the in-work tax credit was more than what National was offering through its tax cuts, Mr Hipkins claimed.
"Would I like to do more, of course I would ... but now is not the right time for big inflationary spending," he said.
He said if he had to target financial relief, he would aim it at families.
He accepted that people might think that Labour had not had a good year and had been "more focused on ourselves and not on you", a reference to the several ministers that have left or been dismissed from his government.
Speaking to reporters after the announcement, Mr Hipkins was asked if he could name experts who supported the policy.
Mr Hipkins did not name any experts, but emphasised that other countries had the same approach.
He rejected suggestions that the move would lead to confusion about what grocery products qualified for GST-free, saying that distinctions were already made in the tax system. A technical group would work out the finer details, he said.
National leader Christopher Luxon said the real winner out of Labour’s policy to remove GST from fruit and veges would be supermarkets.
"The vast majority of Kiwis will be better off on our tax plan," he told reporters yesterday afternoon.
Experts had said removing GST off fruit and vege was a complex policy, adding that it was smarter to "cut out the middle man" and provide tax cuts, Mr Luxon said.
"This is going to help supermarket owners, it’s not going to help Kiwi families."
Families would see the benefit National could provide through its tax plan, which would be released shortly, he said.
Wellington City Missioner Murray Edridge said Labour’s plans to remove GST on fruit and vegetables and raise the In-Work Tax Credit was a good start.
"Any political party that doesn’t pay attention to the cost of living issues is not listening to the country well enough."
Mr Edridge said the estimated $30-$40 extra a week for those struggling would be a life changer.
"Someone has commented saying that the extra money will only total up to a few cups of coffee a week, but the people we’re talking about don’t drink cups of coffee for $5 or $6 a week," he said.
"An extra $20 a week will make a difference between being able to feed the kids or not."
The move has proved widely popular with supporters across the political spectrum. A Talbot Mills poll found 66% of 1296 survey respondents supported or strongly supported the policy.
Eighty percent of Labour supporters and 75% of Green supporters were in favour, while 59% of National supporters and 45% of Act supporters also believed it was a good move.
Crucially, it is understood the policy went down well with swing voters, of whom 80% were in favour, according to the poll conducted from July 28 to August 2.
The announcement was likely welcomed as a win for National’s deputy leader Nicola Willis, who last month claimed she had been leaked Labour’s plan to remove GST from fruit and vegetables.
It was her second accurate allegation, having claimed earlier this year that Labour was in the advanced stages of implementing a wealth tax, which turned out to be true. Mr Hipkins has since ruled out introducing a wealth tax under his leadership.
Act Party leader David Seymour was critical of the policy, and called it a "vote-buying gimmick".
"It’s an act of desperation from a visionless, poll-driven party which is out of ideas, out of Ministers, and fast running out of other people’s money," Mr Seymour said in a statement.
— The New Zealand Herald
