The Labour Party has confirmed it would remove the goods and services tax (GST) from fresh and frozen fruit and vegetables if re-elected on October 14.
It's part of the cost of living election policy the political party announced on Sunday and is expected to save households about $4.25 per week.
One of the difficulties found overseas with GST exemptions is what products they apply to and which ones they don't.
In a policy document released with the announcement, Labour said the exemption would not apply to canned or dried items and also not to juices.
"We have to draw a line somewhere and where we have gone is affordable, practical, and achieves our policy aims. There are boundaries everywhere in the tax system and we're confident tax officials can make it work," it said.
"Our framework is based on whether the fruit or vegetable has been 'processed' or not. Processed in this context means cooked or combined with other ingredients. This rules out anything canned because of the heating process that accompanies canning."
Under the Labour policy, 'processed' does not mean being cut up and wrapped without additives.
"This means that pre-prepared vegetables like fresh spinach in a bag would be zero-rated. The same rules mean that a mix of vegetables frozen together would also be zero-rated for GST. On the other hand, potatoes mashed into chips, coated in canola oil and then frozen would be excluded and would still attract GST."
It acknowledges there will be some "line-calls" and will therefore establish an expert group "to work through the finer details of the policy and help develop the empowering legislation".
"New Zealand has the advantage of implementing this policy with lessons from other jurisdictions around the world that have made similar exemption moves and had these tested in their court systems," the policy document says.
"If required, low-cost determinations will be able to be provided through Inland Revenue's Dispute Review Unit or, where necessary, the Taxation Review Authority to avoid the need for court hearings."
Hipkins said: "Since becoming Prime Minister my focus has been on delivering cost savings across the key expenses families face".
"While taking GST off fruit and vegetables isn't a silver bullet, alongside other measures to reduce costs we're delivering a meaningful difference.
"Our 10-point cost of living package includes free doctor's prescriptions, cheaper childcare and 20 hours free ECE for two-year-olds, free or half price public transport for children and young people and now GST off fruit and vegetables and a $25 boost to Working for Families – and there's more to come."
