Labour's search for elegant policy platforms continues in vain. Not content with upsetting the consensus on the Reserve Bank Act and monetary policy, the Labour opposition now seek to upset the clean and level consensus on GST. After ruminating on the idea for most of the year, Goff has declared that Labour will remove GST off fresh fruit and vegetables.
Let's examine some of the qualities of awfulness about the idea. Firstly, if one were trying to mesh a policy with Labour's "for the many not the few" slogan, I'm not sure making grapes tax exempt while retaining tax on raisins makes much sense. "The few" can afford grapes in their fruit basket, with or without tax, and "the many" can't.
Then there's the disproportionate complexity of such an idea for very little gain. The lawyers are having a field day over at Dim Post's if you want to see some of the looming loopholes. If you're going to end a 25 year cross party agreement on a straight-forward consumption tax, this is not the way to go about it.
Goff says the scheme would cost $250 million a year of foregone revenue. How they're going to fill that hole isn't made clear. But costs will echo beyond a lighter Treasury. Labour should talk to some businesses to discover how much effort is going into the GST rise and personal tax cuts right now. This is a doddle compared with the initial and ongoing costs of the GST exemption. The policy is a makework scheme for accountants and lawyers. And, once one exemption is allowed, lobbyists will seek to widen the tax loophole as well.
As long as Labour continues to release expensive esoteric solutions to non-existent problems, the Nats have nothing to fear.
