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MARION VAN DIJK/FAIRFAX NZ via Stuff
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Reality spikes another Labour policy

by Whaleoil on October 24, 2012

Labour wants us to think that we need to take GST off fruit and veges to make it cheaper for poor people to buy…that policy was tits when they thought it up and it is tits now that reality bites.

Furthermore Labour’s MPs proved convincingly that it is easy to live on just $2.25 a day, even when an enthusiastic Young Nat managed to out fund-raise the entire Labour team combined.

Eating healthy will cost you the same as splurging out on junk food, according to a study on New Zealand’s shopping habits.

The Auckland research disproved a view that the cheap cost of fatty and sugary food was driving an obesity epidemic.

But this latest research, presented at an obesity conference in Auckland last week, revealed there was no difference in the weekly spends between the most and least healthy eaters.

A quick browse down the supermarket aisle showed a $2 bag of chips costs the same as a kilogram of potatoes. Milk will set you back about the same as a 2.25l coke, at roughly $3.

Auckland nutritionist Rebecca Whiting, who led the study, said a person’s ethnicity and salary can have more influence on shopping habits than pricing.

“There are a number of factors that drive consumption, and the cost of food is only one – and it may not be as important as we think.

“Habit, preference, meal planning, time, taste, and the desire for family harmony all contribute to the types of food families buy and the meals they prepare.”

Parents in the study were asked how often they shopped at the supermarket, grocer, takeaways, restaurant and dairy.

Maori, Pacific and Asian shoppers were more likely to shop at farmers markets, but Pacific and Maori shoppers were also more often buying take-outs or snacks from petrol stations.

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  • CJA

    On top of this from a compliance perspective taking the GST off fruit and vege would be a fricking nightmare and also cost businesses a hell of a lot having to change their systems to accomodate that change.

    • Name

      Really? Australia seem to be doing fine with fresh foods being untaxed – I guess for supermarkets it’ll just be a tick box you untick, but for the corner fruit store it might be a bit difficult.

      • CJA

        Slight difference there is from my understanding when GST was introduced in Australia that was in the law so no change was required to any systems. It would have been set up that way from the start. Even when GST changed from 12.5% to 15% in New Zealand some accounting packages needed to be upgraded. I know for a fact that some older versions of MYOB would not operate at a 15% rate and customers had to upgrade to the newest version of MYOB which from recollection cost between $250 – $500. Doesn’t sound like a lot of money but it’s still an unexpected cost that some businesses didn’t need.

        • Alloytoo

          The problem, is that with the near universal application of sales tax in NZ, no provision has been made for Zero rating. Other countries do, but it is an added complication, especially for the smaller vendor. Far better to leave well enough alone.

          • http://unsolicitedious.wordpress.com/ Unsolicitedious

            what do you mean? you can add zero rated goods in your GST return which essentially works along the same lines as a credit/debit adjustment

          • Alloytoo

            I mean that most software vendors probably don’t have a ready mechanism for separating zero and normal rated goods. Some (like Syspro) obvious do, but smaller traders may find compiance expensive and difficult.

      • farmgirl

        In Australia, businesses complain heavily about it.

    • Michael

      Wrong CJA, my wife is a CA (tax specialist) and according to her, removing GST from fruit and vege is not a problem, even for small businesses.

      • CJA

        Well Michael I’m a CA as well (funnily enough) and I’d say it would be from a systems perspective having to rewrite code I imagine for some accounting packages and then having to rely on humans (in some cases at point of sale in some instances) to get it right. Could you imagine what Foodstuffs and Progressive would be charged for a systems change? I don’t think it would come cheap.

        • Michael

          I don’t disagree, but the accountant process is not complicated by it.

          If Xero/MYOB and excel aren’t agile enough to adapt to changes in a tax system, that’s a different discussion.

          Changes to these systems should be one off. If you introduce a tax free item, the system is altered to cater for a scenario of products having tax included, added, exempt. Many apps already do the included or add process now, so having an exempt option isn’t rocket science. As a programmer myself, it’s easy to have additional meta data stored in a database that can be used to help present information based on an items tax eligibility.

          Again, not for or against, but the argument of complicating tax is phooey and so is the “cost” of system changes. The reason we don’t change GST on items is to protect the income for the govt or if we remove it, it’s because enough science has been put in that the short term pain is out weighed by the long term benefits to the people of this country.

          • CJA

            Don’t think it is a case of Xero/MYOB not being agile think it is more a case of what is it going to cost businesses. In the case of the GST rate change MYOB did charge it’s customers for the “upgrade” even though it might not have taken the company a long time to implement. The change was necessary for their customers due to the change in law therefore they took advantage of that and charged their customers accordingly (or disproportionately). Businesses will take advantage of that scenario whether it be an accountant, an IT provider etc and in the end the consumer will be the one who wears that cost.

          • Michael

            the complication for the GST increase was the time the IRD chose implement it. It was not in an end of tax year (not that there is a standard one for all companies). So business had to support sales of 12.5% and 15% GST mid tax year.

            We are talking removing tax from certain items form a fixed point in time. It’s much easier to deal with.

            Think about it. The calculations for GST are much easier when tax is removed, regardless of the time the change is introduced. Comparing that to two different tax rates in the middle of a tax year, that is very hard.

            Anyways, we don’t agree on the mechanics, and that’s fine. :)

          • CJA

            Agreed but good to have the debate.

          • GregM

            Yes agreed, I was using MYOB retail manager when GST changed. Even though their patch was a bit rough it wasn’t too much trouble.
            The biggest problem is going to be defining what’s “fresh”.

          • Callum

            Michael, such a change is relatively easy for a large corporate like foodstuffs with centralised systems and everything barcoded. Try it with a small operator who doesn’t have complex till systems, currently whatever they sell has 15% GST so you take your total sales and calculate your GST portion very easily. Now take that same operator and exempt some of their sales, you now need a far more complex system for tracking GST that is wide open to staff errors and potential IRD penalties for getting it wrong. That is before you even get into the supply side, they will also need to separate out the purchases of non taxed items as well.
            0% rate is currently used basically for exports out of the country and can still cause problems with tracking stuff. Exempt supplies (mainly financial services, residential property etc) also only tend to apply to large corporates such as banks who have the systems to deal with them relatively easily or the .
            You then run into the issue for some producers that exempting fresh fruit etc (exempt is different under the legislation to a 0% rate) means they are no longer making taxable supplies so cannot claim GST on their inputs. That wipes out a chunk of the savings as those costs will then need to be passed on.

          • Sarrs

            I don’t know what sort of genius clients your wife has but my biggest problem (as a practicing CA) is that clients just can’t use programs properly. Whether it be entering items incorrectly or running the wrong reports or failing at even basic bank account reconciliation, it takes up more of my time than it should. Granted, my firm is small and our clients aren’t exactly tech savvy but why complicate a system that, as a rough estimate, a third of businesses have trouble with already?

          • CJA

            Not surprising that we agree again Sarrs. We have the same problem with some of our clients and the amount of time spent sometimes in relation to GST is quite annoying.

          • Michael

            @Sarrs:disqus she doesn’t have genius clients (I get to hear the war stories, which are funny). You are implying that this would complicate tax, which I disagree with.

          • CJA

            Think it is more the practicalities of the matter Michael rather than complicating tax. As you would know well from conversations with your wife that some people can’t do accounting hence forth they have an accountant. I don’t fully understand some parts of economics but I’m an accountant not an economist. GST isn’t hard for accountants to follow as we do it day in and day out whereas your average joe might not be able to understand it in the first place therefore making fruit and vege zero rated in my opinion is over complicating matters (for some people).

          • Sarrs

            This isn’t about complicating tax, it’s about complicating tax compliance.

          • Bunswalla

            It’s possible there’s been a bigger load of tosh spouted by someone on a topic like this over the years. But I doubt it.

      • CJA

        And coming from another perspective it’s an unnecessary cost to business that they would no doubt try to recoup from the consumer i.e. driving up the price of fruit and vege and in the end improve their margins on fruit and vege by simply charging more making it no less expensive for the consumer. It is a waste of time policy.

      • Alloytoo

        As a tax specialist you wife should understand the importance of keeping any tax simple through minimal loopholes and exemptions.

        • Michael

          She does, but changes to GST aren’t the problem, changes are easy. There are far more complex things in our tax system than +/- GST on food. We already have GST free items (apparently, no idea what).

          I am not advocating for GST to be removed, just pointing out it’s not an issue from an accounting prospective.

          Keep the argument fact based. That is all :)

          • Kimbo

            The problem with accepting that explanation is that your wife, while she has a valid perspective as a CA, is not the direct participant.

            For something really “fact based”, if is far preferable to listen to the actual participants, i.e., the shop owners who incur the time and cost (including to your wife!), and also the front-line staff who have to implement GST exceptions.

          • CJA

            Thanks Kimbo that is the perspective I’m coming from (probably badly worded above).

          • Michael

            You imply that there is time and cost, how do you know? This is a theoretical debate about something as high level as “remove GST from item X” with discussing how it would be implemented.

            How do you draw fact from that? Do you own a foodstuffs shop? A tyre shop? Do you have any prospective on the “time and cost” ?

            For a start, frontline staff don’t implement tax, systems implement tax collection.

            I contract, I invoice my time, it’s not hard to not have a GST included on particular items.

            People seem to want to inflate the “time and cost” without thinking about it.

            mole hill.

          • Kimbo

            “You imply that there is time and cost, how do you know?”

            I don’t.

            Which is why I’m saying you go and ask the participants (rather tahn an incidental player, such as your wife), and then you have an empirically fact-based explanation, rather than speculations based on logic (which may be faulty or non-applicable).

            For example, you may find staff have to “know” that peanuts are not actually a nut, but are actually a legume, so they are vege, whereas walnuts are indeed a nut, and may not count as fruit and vege. Or you may not. But ask them!

          • andrewo

            Yep – it’s easy to implement. You just have to employ more accountants…(headbang!)
            And remember she’s only an AC- not an economist

          • Michael

            fair cop, she isn’t economist, but I never said she was… I am making the statement that creating a tax free group of items will not complicate the tax system.

            Regarding the economy, no where have I said this is good idea. I have only stated this is not as hard to implement this in the _tax_ system and the software behind it.

            The cost to the coffers and the trickle effect on the nations heath, never speculated here. I doubt GST free food will change anyones eating habits. This shouldn’t be hard to measure since this idea isn’t new. The UK has VAT (which creates a nice measure of what is tax free, has value been added?), Aussie has done GST free food.

          • Bunswalla

            As the owner of a software company that develops accounting software, I can assure you that changing the way tax is collected, reported and sent on to IRD is a very complex process. I completely agree that keeping these aspects of the tax system as simple as possible is best all round.
            Unless your missus is also in the business of designing, modifying, implementing and supporting accounting software, I respectfully point out that you haven’t got a clue what you’re talking about.
            I just think we should keep things fact-based, that’s all.

        • http://unsolicitedious.wordpress.com/ Unsolicitedious

          true but exemptions already exist (no GST on interest for example) so it is merely a case of expanding that. That said I am not advocate of it as it wont change anything

      • farmgirl

        So if I start a business making apple pies and raisin bread etc, which bits are GST liable? How do I assess the GST portion when selling it? Total idiocy.

        • Random66

          I was thinking the same farmgirl. If a cafe owner purchased raw fruit and vegetables GST exempt then made a finished product with those items in, as well as other produce e.g. bread and eggs, which were not GST exempt. How do they calculate the GST portion of the finished product, would you only be able to apply GST to part or all of the end result?

  • Michael

    There is also the harder to measure trickle effect of being healthier. Less sick days, less visits to the quacks, less potential to end up in hospital with a poor diet related heath issue.

    Having lost 20kgs myself recently and still another 30kgs to go, I can vouch for the healthier effects. It’s great and it doesn’t take much to change how you eat and turn it around from a shitty fat shoveling process to something that is much more benificial

    As for Labour, this is just “show mans” politics. If they think South Auckland if going to rush out to the green grocer because there is no GST, then they are smoking some decent crack.

    • jonno1

      Impressive Michael, I too have lost 20kg over a year or so (85 to 65) but I think I’ll stop now!

  • Whafe

    but Pacific and Maori shoppers were also more often buying take-outs or snacks from petrol stations
    So why is this? Is it lazyness or just can’t be bothered… Good to see some stats on the cost of eating healthy and eating shit food…
    It is scary looking at what many people stick in their shopping trolleys…. They never seem to have a bag od potatoes, a whole cauli, cabbage etc etc…
    As usual, it is everyone elses fault, least the individuals whom are obese..

    • Patrickm

      Petrol stations – probably the most expensive choice of grocery stores. we are being gouged enough by the fuel companies without giving more for massively marked up groceries.

      • Whafe

        Petrol Stations were for urgent items in the last minute… Now that supermarkets are open so often, petrol station purchases should never occur..

      • Name

        Petrol stations make f all on the sale of gas – 1 or 2c a liter. they make money from the cokes and chips and cigarettes they sell.

      • dyannt

        Petrol stations are convenient because you can leave all the kids in the car while you shop. Try doing that in a supermarket carpark. Someone is sure to report you to the powers-that-be.

        • Grizz30

          On that notion, they should also have a few pokie machines.

          • dyannt

            I’m sure they would, if they could.

          • Patrickm

            Why not a bar so I can get a few cold ones in before a long trip? Missus & kids could sit in the car while I enjoy half a dozen handles of Lion red before continuing my journey. If I have a really good long session the traffic will have died down & I can really put the hammer down. Probably sit a crate in the footwell beside the missus – she can pop the tops off the bottles while I concentrate on the road ahead.

  • Sir Cullen’s Sidekick

    Tories – I have been just handed a sheet which contains Labour-Green policy on healthy food for the 2014 elections. The policy is as follows:

    1. All “green” vegetables and fruits will be free
    2. There will be a petrol levy of 50 cents a litre to fund this initiative
    3. All soft drinks will incur a modest additional fat tax of 25%

    Sheep and Mozie think that these kind of sensible policies will be a vote winner and I am sure there are enough dumb kiwis in NZ to vote for this policy. After all, we are the suckers who voted for a tax increase in 1999 election. Why not for this?

  • Whafe

    Bottom line is, those that the study shows eat crap food, are NOT going to eat more healthy vegetables if the GST was removed, I call Bullshit on that…
    They will all say they will eat more vegies etc, but it will NOT happen…

  • El Jorge

    I have issues with this!
    1) Removing GST from fruit and vege is just a waste of time. They are seasonal commodities, supply and demand dictate their pricing hence the seasonal fluctuations. If anyone thinks that the apples they are currently $3/kg for will go down to $2.55/kg they are dreaming! F&V shops and supermarkets will just keep rounding up the price as supply and demand dictates. If this ‘scheme’ ever came into effect I’d be buying a F&V store and enjoying the extra 15% profit!
    2) “A quick browse down the supermarket aisle showed a $2 bag of chips costs the same as a kilogram of potatoes”

    What is the weight of the $2 bag of chips? 1kg? 200gm? How about some more info?
    This article is disingenious at best. When researchers actually compare apples with apples….or raw products vs finished ‘junk food’ their research might be a bit more credible.
    3) Who in their right mind compares the cost of milk to Coke?
    They are completely different commodities. You may as well compare Bourbon to petrol, petrol is cheaper so does that mean people drink more petrol? Do you pour Coke on your cornflakes?
    Its a stupid argument

    • http://twitter.com/hifuncblonde hifuncblonde

      Totally agree with your statement 1). There is a price-point above which sales will rapidly decrease, and below which sellers need not go to maintain sales. Supply and demand dictates the sale price, not whether GST is included or excluded. And demand from customers who have never developed a taste for fruit and vegetables or have no idea how to cook or serve them, is not likely to change with the removal of GST.

  • http://unsolicitedious.wordpress.com/ Unsolicitedious

    GST removal is easily done, but it wouldnt change a thing….except give the lefties more room to whinge as they would complain the ‘rich’ are benefiting the most (just like tax cuts where we got more tax back – because we pay a heap more – we would get more benefits because we buy more fruit & vege).

    People have to get their heads around the fact that income is only one very small part of dietary choices.

    I was thrilled to read that article on Stuff the other day – finally some clear research to debunk the left-wing myth that poor people eat more junk food because it is cheaper. It so clearly is not! In fact, it is more expensive as you need more of it to fill what is no doubt an ever increasing frame.

    As an at-home Mum I am the main (well, only!) grocery shopper in our house and I have observed other shoppers and what they buy for years. Especially on Tuesdays – benefit day (as I found out when I accidentally went to the bank and found myself in an unusually long que to deposit money).

    Without question, I see every low-income family, including the ones who attempt to buy healthier items, with the followIng:

    budget white bread
    potatoe chips – large packets and packets of ten (OMG – super expensive. If you want to do that divvy up the larger bags into snap lock bags or use old fruit/vege bags)
    museli bars
    budget soft drink
    packets of pies
    le snacks (OMG again – void of nutrition and expensive for what they are!)
    Cracker things like the snax/shapes
    frozen chips
    Cheap fatty meat
    Very few veges & fruit

    Just to name a few. All of which are actually quite expensive.

    Instead, I would suggest they:

    1)Buy a breadmaker – $150-170 one off cost that last for years and which equates to less than $2 per loaf (same size as budget but wholegrain so way more filling) including ingredients & power. It pays for itself very quickly
    2)Make homemade museli slice – each slice costs about $0.30 instead of $0.75 when buying a box of museli bars
    3) Dont buy soft drink pies, chips, le snacks etc. These are luxuries and void of any real nutrition. Instead, buy more veges & fruit – they are more filling and overall cost far less. Seriously. A Pie has about 500 calrories…..you would have to eat a shit load of apples & bananas to get the same calories yet one apple & one banana would be just as filling. It is all in the head.
    5)Drink water from the tap – be thankful as in some countries you have to walk miles to get it. And dont complain about the taste – its water for God’s sake so it’s not meant to taste of anything!

    Their bill would be cheaper, they would be able to afford to buy better meat that actually has meat in it, and they would not be so fat (how many ‘starving’ adults and children in NZ have you seen that are actually lean?)

    I follow all of the above and buy out of season fruit & vege (capsicums etc), speciality coffees, $20 wines, European beer etc and yet spend on average about $200 per week including 1x takeaway per week (usually subway which is about $30) for 2 adults and a child. It would be far less if I cut out the luxuries & the subway

    • CJA

      Good post. Feel a bit stupid now rabbiting on about accounting issues after reading this.

    • Grizz30

      So what you are saying is that we are subsidising people’s stupidity.

      • http://unsolicitedious.wordpress.com/ Unsolicitedious

        Yep. That is a far more succinct/concise way of putting it! :) So depressing.

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