KEVIN STENT/Stuff
Countdown says removing GST from fruit and veg would be a significant change, while a dairy industry body says it would cause “accounting havoc”.
Supermarket group Countdown says removing GST from fresh fruit and vegetables would not be cost-free, amid speculation the Government is considering the move.
A spokesperson for Countdown said it would comply with any changes that were made to GST.
“However, like any significant change, it would take some time and cost to fully scope out, implement and administer,” she said.
Countdown couldn’t comment much further without having more details about what any change would look like, she said.
Smaller retailers appear more concerned.
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Matt Lane, general manager of Night ‘n Day Foodstores, said removing GST in its stores would “certainly not be easy”.
Night ‘n Day used a lot of fruit and vegetables in its home-made products such as salads and sandwiches, which would raise the question of whether it would buy the fruit and veg for those free of GST, and whether it would have to charge GST on all or only a portion of those of made-up products, he said.
Alden Williams/Stuff
Prime Minister Chris Hipkins will neither confirm nor deny plans to wipe GST from fruit and vegetables.
Foodstuffs declined to comment on how long it might take and how much it might cost to change its point-of-sale systems to remove GST on fruit on veggies, saying it wouldn’t be commenting on “election policy proposals”.
Sunny Kaushal, chairperson of the Dairy and Business Owners’ Group, said removing GST from fresh fruit and vegetables was “one of those policies that sounds good unless you think about it a bit”.
“It's like giving those big supermarkets another 15% margin. This is going to be in the pockets of the supermarkets,” he said.
“Some prices might go down. But within a year or so it will become lost in the mists of inflation, supply chain issues, the war in Ukraine, storms and seasonality and so on.”
Challenges that dairies would face complying with such a change would include changing their point-of-sale systems, additional paperwork and dealing with questions from customers who were confused and might be suspicious about when GST should apply, he said.
“It is going to create accounting havoc.”
Stats NZ data appears to suggest removing GST from fresh and chilled fruit and vegetables might save shoppers between $300 million and $400m a year if retailers passed on the full benefit to consumers, depending on how the exemption was applied.
Deloitte tax partner Allan Bullot said economic theory indicated only some of the benefit would be passed through to consumers, and the degree of pass-through would be reduced if grocery retailers such as supermarkets enjoyed market power.
Chris McKeen/Stuff
Dairy and Business Owners Group chairperson Sunny Kaushal says a partial roll-back of GST would create headaches for smaller retailers.
A study by the International Monetary Fund in 2015 estimated that when goods were exempted from GST by governments in Europe “for various political reasons”, as little as 30% of the savings were commonly passed on, he said.
Bullot acknowledged such research could be complicated by factors such as the level of pass-through potentially increasing over time.
Removing GST from some products but not others always created “boundary issues”, he said.
By way of example, one issue that might need to be considered was whether lettuce seeds would be GST-exempt, he said.
The compliance issues involved in removing GST would favour larger retailers over smaller ones, Bullot said.
”If you are a large supermarket, you have a central team of people whose job it is to make sure that the right barcodes are on the right product categories.
“If you are a corner dairy, that’s quite a lot to ask.”
GST did the job it was designed to well, but “if we ask GST to do other jobs such as directing people towards healthy eating, there are going to be unintended consequences and costs,” he said.
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