Freedom New Zealand

A petition urging abolition of GST on food is gathering support outside Auckland supermarkets as consumers struggle to cope with rising prices.

The cost of filling the average supermarket trolley has jumped by more than a quarter in the past year, as the effect of international food shortages hits New Zealand.

A spokesman for Finance Minister Michael Cullen said a one-off change to GST would not stop international forces pushing up food prices.

"The Government will not change the GST system, as creating exemptions would add extra compliance costs for businesses which would be passed on to consumers," he said.

National's finance spokesman, Bill English, said his party's first preference was to tackle the affordability problem by cutting income taxes.

But the left-wing Residents Action Movement, which started the petition to abolish GST on food, said more than 1000 people had signed in its first two days.

The National Heart Foundation, which has campaigned for five years to have GST removed from "healthy" foods such as fresh fruit and vegetables, said rising food prices made the move urgent.

Public Health Association executive officer Gay Keating called last week for GST to be removed from "nutritious basics" such as fruit, vegetables and milk.

"A bottle of Coke is so much cheaper than a bottle of milk," she said. "We'd be interested in making a bottle of milk much more affordable."

New Zealand is one of only three countries in the 30-nation Organisation for Economic Cooperation and Development (OECD) which taxes food at the same rate as other goods.

Australia exempts basic foods including fruit, vegetables, unflavoured milk, cheese, eggs, bread, cereals, meat, fish and baby food.

But it taxes "luxuries" such as biscuits, ice cream, carbonated drinks, restaurant meals and takeaways.

Removing GST from all food in New Zealand would cost the Government about $2.4 billion a year.

Taking it only off fruit and vegetables would cost about $300 million a year.

FOOD TAXES

Most food exempt: Britain, Ireland.

Basic foods exempt: Australia, Canada, Mexico, South Korea.

Food taxed at lower rate: Austria, Belgium, Czech Republic, Finland, France, Greece, Hungary, Iceland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey.

Food taxed at same rate as other goods: Denmark, Japan, New Zealand.

No GST: United States.