Opinion: An opportunity for discussion on the topic of GST removal from food in New Zealand opened up again with Te Pāti Māori’s amendment bill introduced to Parliament yesterday, proposing the removal of GST from all food products and non-alcoholic beverages.
However the bill was shot down after being opposed by Act, NZ First, National and Labour.
In response, Te Pāti Māori co-leader Rawiri Waititi called it a “sad day”, defending the bill as a starting point to reset a fairer tax system over a regressive tax system that punishes the poor.
Te Pāti Māori’s proposal went further than the Labour Party’s pre-election promise to remove the 15 per cent GST from fresh and frozen fruits and vegetables, which received significant public support.
It is not surprising why removing GST from fruits and vegetables was such a popular idea; many New Zealand families have been battling unprecedented increases in food prices over recent years through the cost-of-living crisis.
Their household budgets are squeezed even tighter, particularly those of low-income families who spend a greater proportion of their discretionary income on food than higher income households. Families with young children may face additional strains on household budgets from childcare responsibilities taking them out of the workforce, reducing the number of hours they can work, or paying for childcare.
Food is a basic human need, and food affordability has been a significant and unrelenting source of stress for New Zealand families. Although food prices are entirely outside of their control, it is families who manage every unsettling price increase they see on food products when grocery shopping.
Despite being very skilled in managing their household finances, (using strategies such as shopping around, purchasing cheaper options and limiting variety to minimise food costs), money can only stretch so far.
In 2022-23, approximately one-fifth of New Zealand households with children reported eating less because of a lack of money, or that food ran out in the household due to a lack of money. In the nation’s most deprived neighbourhoods, this figure rises to 36 percent of households with children. Food banks are consistently reporting record numbers of users, with a report showing a 165 percent rise in usage since before the beginning of the Covid-19 pandemic.
These figures are very concerning and underscore the need to take urgent action to increase the money available within household budgets. The introduction of a bill to remove GST from all foods and non-alcoholic beverages would have therefore provided some much-needed relief for many New Zealand families.
While economists have argued that removing GST from foods is an expensive and complex exercise in terms of administration, and public health experts have argued that the approach is inequitable because it is not targeted to lower-income households (both arguments raised by parties opposing the bill), we need to start somewhere and focus on the changes we can make now to relieve families of the burden of high food costs.
New Zealand’s approach to taxing food differs from that of comparable countries including Australia, Canada, and the UK, where most basic foods purchased at the supermarket are exempt from GST (or VAT, as it is known in the UK). In these countries, basic foods are viewed as essentials and are therefore not subject to a consumption tax, to keep the foods more affordable for consumers.
According to the 2023 University of Otago Food Cost Survey, the weekly cost of a basic diet for a family of two adults and two children is $273 per week.
Removing GST could save this family approximately $40 in their weekly food costs. This is substantially more than if GST were to be removed only from fruits and vegetables.
Key food groups contributing to food costs in the survey were also fish, dairy, meat, and poultry, all of which have become increasingly out-of-reach for families in recent years. The proposed amendment bill would also make these foods, which are important and desirable inclusions within the shopping baskets of many New Zealand families, more affordable.
It is alarming that in a food-producing country like New Zealand, many families seek support from charities for food, a fundamental human right. Extending the GST removal to all food products and non-alcoholic beverages, as proposed by Te Pāti Māori, would provide some relief at the checkout.
Nonetheless, the affordability of food is only partly influenced by food prices. Income and household expenses such as rent, mortgage repayments, power costs and transport costs are also important factors, therefore related issues including housing affordability, inadequate household income and energy poverty must also be addressed.
There must be a strong national focus on reducing levels of food insecurity in New Zealand families, especially those with children. It is concerning that the Ka Ora, Ka Ako (free school lunch) programme funding is under threat at a time when such initiatives offer some buffer to the cost-of-living crisis. Addressing household food insecurity requires a multifaceted approach which includes developing strategies to increase the money available to low-income New Zealand households with stronger welfare support, hearing community voices about their needs and what works for them, as well as supporting initiatives that increase food resilience in communities with a focus on enabling families to access food in mana-enhancing ways.
Ioanna Katiforis is a PhD Candidate in the Department of Human Nutrition, University of Otago. Dr Claire Smith is a Senior Lecturer in the Department of Human Nutrition, University of Otago.
