this post was submitted on 15 Jul 2025
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I have mixed emotions over all this.
To start, I agree, flat taxes are regressive and a bad way to tax people.
However, NZ gets a lot of tourists and GST is an effective way to collect money from them to fund the things they use. You could say just tax them directly, but I think a $1000 entry fee would put off many tourists that otherwise would come here and happily pay that much GST in their spending.
We also have no true capital gains tax. Without this, GST is practically the only way we get tax from the ultra wealthy, right?
So instead we could leave GST alone and provide subsidies to make fresh food cheaper, but that seems to also be making the system more complex by balancing tax collection against subsidies for the same thing, and also creating a whole chain of questions about where the subsidies go. Do we give them to potato farmers that then get pressured for cheaper prices from the duopoly, who don't pass along the full discount and end up subsidising their profits? (This will likely happen with removing GST too, but we won't have to work out which farmers get subsidies and which don't). If we subsidise farmers then we also subsidise overseas consumers that they sell to.
So do we just hand cash to supermarkets to make certain products cheaper? This seems more complex than just removing GST.
I have no view on what's the right thing here because it seems complex and like there might not be a right answer. But I am curious how subsidies would work in practice.
This is a major problem with flat taxes; the ultra wealthy pay a tiny portion of said income/wealth in GST; vs the poor who pay a huge portion of their income in GST.
Not true; complicating GST, complicates it for all businesses. It adds compliance overhead to everyone; even though it would be minimal extra for most businesses, it is not zero. Not zero multiplied across all businesses is still millions in compliance dead weight cost.
A targeted subsidy; could be applied at the producer end, making the bureaucratic overhead much smaller. Thus giving NZ producers a leg up compared to overseas producers.
This isn't as anti-competitive as it first seems either. Since feeding ourselves is a national security concern. It behooves us to prioritize local production, even in the event we have to subsidize production.
When you talk about a targeted subsidy, the farmers would receive this regardless of if their product is sold in NZ or overseas? Or would there be some apportionment of subsidy based on how much is sold locally?
I would make sure it was NZ production into the NZ market.
No produce heading offshore would get subsidised.
Since NZ produces way more food than we consume, how would that work in practice? Are there models for this in other countries we could follow?
The grower/farmer would have to declare where the produce was going.
I'm not sure how much of this is already done, for traceability reasons, but some is done.
Ah yes. Presumably there would be records of exports and records of sales to local retailers (as well as records to e.g. places that can foods), there must currently be enough information recorded to know where food ends up. So probably isn't that much overhead to have this process.
Makes sense.