Labour drops tax cuts in favour of $1.5B of new spending

The Labour Party is ditching two of

its flagship tax initiatives from the last election, giving itself an extra $1.5 billion for alternative policy promises.

Labour leader David Cunliffe announced the changes, which will see Labour drop its proposal to exempt fresh fruit and vegetables from GST and the first $5,000 of earnings from income tax.

The GST promise, while politically popular, was criticised by tax experts as creating a compliance minefield for retailers, while the $5,000 tax exemption threshold would have benefited wealthy people as much as low income earners while undermining one of the most reliable parts of the tax base.

Cunliffe said the changes would allow Labour “to create fresh opportunities for all New Zealanders.”

“As leader, I have been reassessing how to give Kiwis the best bang for their hard-earned bucks. We will be removing the previously proposed $5000 tax-free zone and the GST exemption on fresh fruit and vegetables.

“This decision frees up around $1.5 billion per annum,” Cunliffe said in a statement.

“While these were worthwhile policies, we believe there are better ways to help struggling Kiwi families.”

Some flavour of policies that could be funded by the revenue freed up by dropping both promises would be outlined in his State of the Nation speech next Monday.