Those on the right of the political spectrum are criticising Labour's tax policy as "an act of desperation" and a "miserly offering", while the Greens on the left say New Zealanders will be better off under their plan instead.
Labour leader Chris Hipkins on Sunday confirmed the party would run at the election with a tax policy that included removing the goods and services tax (GST) from fresh and frozen fruit and vegetables while also increasing the amount paid out through Working for Families.
The GST policy would save average households about $4.25 per week from April 1 next year, which is also when Labour would increase the amount given to families with children by $25 per week to $97.50 per week. Overall, about 175,000 households would be about $47 per week better off under Labour's policy once abatement thresholds for Working for Families were lifted in 2026.
"Since becoming Prime Minister my focus has been on delivering cost savings across the key expenses families face," Hipkins said on Sunday.
"While taking GST off fruit and vegetables isn't a silver bullet, alongside other measures to reduce costs we're delivering a meaningful difference."
It's part of a 10-point cost of living plan from Labour, which includes changes already introduced at the Budget like removing $5 prescription fees and making public transport free for some. A few further policies are expected later on the election campaign trail.
Political reaction
The Sunday announcement is being called a "miserly offering" by the National Party, with finance spokesperson Nicola Willis saying it will "do very little to help families suffering through the cost of living crisis". Instead, she said it will benefit supermarket owners.
"Kiwis are being smashed by a cost of living crisis that has dragged into its third year and the best Labour has to offer is a tax change worth less than a kumara," Willis said. "Labour are foolish to suggest supermarkets will pass all of this reduction on to shoppers."
A single kumara is selling for about $5.20 at Countdown.
Tax specialists - including from the working group set up by the Government last term - have argued that removing GST from products won't necessarily lead to benefits for consumers as supermarkets may just hike their prices.
Labour said its new Grocery Commissioner will be able to check the savings are being passed on and take action if expectations are not being met.
"The Commissioner has powers under the Grocery Industry Competition Act 2023 to require information and reports from supermarkets on matters such as their prices and margins," a Labour policy document said.
"They can also proactively issue guidelines laying out their expectations. The Grocery Commissioner will receive and investigate complaints. We will ensure they are able to get under the hood and report publicly to ensure benefits are passed on by supermarkets."
Willis also raised the point that Grant Robertson, Labour's finance spokesperson who was at the announcement on Sunday, had just months ago spoken out against GST exemptions. He's also previously called them a "boondoggle".
"He knows the 'Grocery Commissioner' won't have a hope against the most powerful duopoly in the country," she said. "Chris Hipkins has forced him to suck it up, with little care for whether the promise of cheaper groceries will actually be delivered."
In a speech on Sunday, Robertson said he had been on his own "road to Damascus when it comes to the announcements we're making".
Robertson later elaborated on that to reporters, saying he previously had two main concerns - one on whether the benefit would be passed on and second, that New Zealand's tax system was stable, sound and efficient.
He said the new Grocery Commissioner dealt with the first concern and he had been convinced by looking at exemptions in other countries that it was possible to make the changes.
"Actually doing something directly about the price of food matters sufficiently to me that we can make that change," he said.
Willis said National wanted to "cut out the middle man" and just give Kiwis tax cuts by reducing tax brackets rather than relying on supermarkets to pass on the savings. National is still yet to release its full policy and costings. Labour points out the indexation policy National has released so far would help the wealthier more than low-income families.
The ACT Party has also attacked Labour's announcement, calling it an "act of desperation from a visionless, poll-driven party".
ACT pointed to the Tax Working Group's conclusion that GST exemptions" are complex, poorly targeted for achieving distributional goals and generate large compliance costs".
"Furthermore, it is not clear whether the benefits of specific GST exceptions are passed on to consumers," Sir Michael Cullen's group said in 2019.
ACT's David Seymour said it was a slippery slope taking GST off fresh and frozen fruit and vegetables.
"The simple, universal nature of GST is what makes it such an effective revenue collector, where would you stop with the exemptions? What about tinned fruit? Milk? Bottled water? The biggest winner would be the avalanche of lawyers and lobbyists seeking to create and exploit new GST loopholes."
Asked on Sunday if he could name one tax expert or specialist who may think their GST policy was a good idea, Hipkins replied: "I can name a whole lot of tax experts and economists who think that the tax system should never be changed".
"They are not the people who are having to take items out of their policy," said Hipkins.
Robertson added: "This policy is not for them. This policy is for the people who go to the supermarket".
Seymour also called a comment from Hipkins that he would rather target support to "mums and dads than to millionaires" an "own goal".
"His own policy launched today will do just that," the ACT leader said.
"Removing GST from fruit and vegetables will help wealthier households three times more than it will lower-income households."
Data from the Household Economic Survey in 2019 shows that couples with children spent the most on fruit and vegetables weekly, while one-person households spent the least.
In terms of income groups, the most amount of money was spent on fruit and vegetables by the wealthiest people and the least by some of the lowest-income households.
But Labour said those with lower or more average incomes tend to spend a larger proportion of their overall income on fruit and vegetables, meaning the policy will have a greater impact on them.
ACT wants to implement a two-rate tax system of 17.5 percent and 28 percent as part of a set of tax changes.
The Green Party reacted to Labour's proposed Working for Families changes by saying its own policy would be better.
The Greens want to replace Working for Families with a single payment. Parents would receive $215 every week for their first child and $135 per week for every subsequent child. Parents would receive an additional top-up of $140 a week for every child under three, with Best Start doubling.
The abatement threshold would be $60,000, which is higher than the $50,000 proposed by Labour in 2026.
"People will be much better off under the Green Party's plan, and it will all be paid for by a simple and fair tax on the wealthiest few," said the Green Party's social development spokesperson, Ricardo Mendendez March.
"It's not up to politicians to rule policies in or out. If people want our plan, they should vote for it - because the more Green MPs we have, the more we can set the direction of the next Government.
"The Green Party is the only party with a plan to make sure everyone gets the support they need to cover the weekly shop, pay the bills, and afford rent - and it's all paid for from a fair tax system."
Other reaction
Infometrics principal economist Brad Olsen said it was "disappointing" to see Labour propose the GST policy as it "ignores all the evidence and although clearly a popular political move, abandons some of the hard-won economic credibility built up over time".
"Despite the Prime Minister's constant message that the policy if focused on low-income families, the financial benefit would give more support on a dollar-basis to higher-income households," Olsen said.
"Taking the roughly $500m a year cost and literally just paying the lowest half of households by income in cash would've been a more effective policy."
He also questioned whether the Grocery Commissioner would be able to ensure the savings are fully passed onto consumers.
"Even if a supermarket itself cannot and does not raise the price back to the pre-GST removal price, there's nothing stopping suppliers earlier in the supply chain raising their prices, given that everyone knows that households are able to pay the pre-GST removal price. In the UK, a removal of VAT from books saw the publishers and other distributors collect most of the benefit."
Olsen said it was "hard to stomach" Labour's argument that New Zealand is currently an "outlier" due to having few GST carve-outs.
"Other countries overseas always talk about New Zealand's comprehensive GST system as being the envy of the world. Saying that New Zealand is a global outsider is like saying the All Blacks are an outsider when we beat everyone else. Just because other countries have poor policies, don't mean that New Zealand should aspire to the same."
The Better Taxes for a Better Future group - supported by a range of non-governmental organisations like Amnesty International, the Salvation Army, and a range of unions - called the GST policy a "welcome step".
"Our campaign calls for better taxes to ease the impact of tax on the less well-off in Aotearoa, and better taxes to promote good health - we're pleased Labour's policy embraces both these goals," said spokesperson Glenn Barclay.
"Other countries like Australia have similar GST exemptions, so we know it can be done."
But Barclay said the group was "disappointed" Labour wasn't looking at "more fundamental reforms", like a wealth tax.
The Restaurant Association said the removal of GST from fruit and vegetables could reduce operational costs for hospitality businesses.
"By eliminating GST from these essential food items, we anticipate a reduction of in the core cost of food for our member businesses. With the costs of doing business rising exponentially over the last year putting increasing pressure on businesses, this is something many members have been supportive of," said chief executive Marisa Bidois.
"However, for this policy to be effective, it is imperative that if it does come to fruition, its implementation is both straightforward and practical. We emphasise the need for clarity and simplicity to avoid potential ambiguities that could lead to unnecessary complexities for businesses. One critical concern is the potential for uncertainties regarding the eligibility of certain items.
"In this regard, should this come into effect we would like to voice our desire to collaborate on its implementation to ensure a seamless and efficient execution of the policy."
Labour has said exemptions won't apply to processed foods, ruling out canned or dried items as well as juices.
It has acknowledged 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."
