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$250m Amateur Error In Labour’s GST Costing

A closer look at Labour’s costings for their policy to remove GST from fruit and vegetables reveals a schoolboy error equating to a quarter-of-a-billion-dollar hole, National’s Finance spokesperson Nicola Willis says.

“Most people can see this policy for what it is – desperate politics from a tired government. But in this desperate, last-ditch attempt to keep their jobs, Labour has mucked up the costings to the tune of around $250 million over the next two years.

“Labour say their policy to remove GST from fruit and vegetables would take effect on 1 April 2023, but this is not reflected in their costing of this policy.

“Labour has failed to account for the fiscal impact of removing GST in the 2023/24 fiscal year, and has only partially accounted for the cost of the policy in the 2024/25 fiscal year.

“If the policy is introduced when promised, there will be a three-month hit to the books in the 2023/24 fiscal year, which ends in June. This is not accounted for in Labour’s policy.

“Labour has also made a mistake in their costing for the 2024/25 fiscal year. The annual cost of the policy should be approximately $500 million as in later years, but Labour has only budgeted $365 million. This is not explained.

“The cumulative size of this error is likely to be around $250 million over the next two years.

“This cannot be explained away as a timing issue related to when GST is paid to IRD by businesses. Treasury are explicit in their advice: GST revenue is accounted for ‘when the purchase or sale of taxable goods and services occurs during the taxation period’.

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“This is an amateurish mistake from a party who are trying to convince New Zealanders they can be trusted with the books.

“New Zealanders know it’s time for a National government that can be trusted with the books, will reduce taxes and rebuild the economy.”

Note: Labour’s costings issued yesterday attached and table below showing estimated error.

GST Costing ($m) 2023/24 2024/25 2025/26 2026/27 2027/28 Total 
Labour Costing $0 $365 $515 $540 $565 $1,985 
Actual Cost $116 $490 $515 $540 $565 $2,226 
Estimated Error $116 $125       $241 

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