Labour’s fuel maths on GST ‘doesn’t work out’ - Luxon

Labour leader Chris Hipkins is standing by his claims that the fuel crisis will lead to big tax gains for the government - but ministers say the opposite.

Hipkins on Tuesday told Morning Report the government would be raking in hundreds of millions in additional GST. He later clarified his estimate: $300m.

“They’re getting hundreds of millions of dollars in windfall gain in extra GST at the moment because of the increase in fuel price, so there are certainly going to be options available to government.”

That did “not necessarily” mean support would be revenue-neutral, but “there are always options available to governments”, he said.

Host Corin Dann pointed out consumption of fuel would be down as people looked to save on costs.

“We’re not privy to that, we don’t have that information,” Hipkins said.

Despite that, he was later bullish on his figures being right when heading into the weekly caucus meeting - saying it was basic maths.

“If you do basic maths, they’re looking at about $3 million a day extra in GST revenue,” he said. “Just do the maths, right, so based on current fuel volumes if you were looking at a dollar a litre increase, that’s about $3m extra a day they’re taking in GST revenue.

“We know that demand for fuel is relatively inelastic, so that’s extra money that’s coming into the government because people don’t have a choice but to fill up the car.”

But Finance Minister Nicola Willis rubbished that, although she said it was a “fair question”.

“I’m really disappointed to see those factually unbased claims from Chris Hipkins, it is a fair question that many New Zealanders have asked me in recent days.”

She said that was not the case for two reasons: because the fuel tax take is a fixed amount and doesn’t rise with the cost of petrol, and the separate GST take was “likely to be offset by reduced use of fuel, but also reduced spending elsewhere in the economy as Kiwis adjust their budgets”.

“Put it this way, as Minister of Finance I’ve certainly not been advised that I’ll be getting windfall tax gains out of the current global crisis - in fact I’ve been told to brace myself for the opposite, which is that this is likely to reduce government revenue.

“I think it’s really disappointing to see the leader of the opposition grabbing what is a fair question but then providing Kiwis with misleading information.”

Prime Minister Christopher Luxon similarly rejected Hipkins’ claims.

“Er, no,” he said. “I understand why people would jump to the GST conversations and float that as an idea, I’d just say two things. One is, it’s really really untargeted in the sense of wealthy people receive the benefit of that when we want to make sure that low and middle income - the squeezed middle folk - are getting the most benefit who are doing the most amount of pain.

“The second part of it is obviously when you’ve had the price of filling up your car go up by $40 which you typically might do every two weeks, that’s $40 that’s got to come off spending in other parts of your household budget, so the aggregate GST doesn’t really follow. So the maths doesn’t really work out.”

Essentially, while GST on fuel might go up, it was likely to be offset by reduced GST take in other areas.

Hipkins pushed back when questioned about that, saying that showed “why families are struggling right now … it’s coming from the people who are paying extra to fill up the car every day”.

“Ultimately we know that people are really struggling with this, if the government are worried about consumer demand going down because of the spike in fuel they could give some of those people back their GST money.”

He flatly denied it was a mistake with a simple “no”.

His finance spokesperson, Barbara Edmonds, was more circumspect.

“We won’t be able to know that until the revenue accounts open up again in the next quarter, you have to remember that other things are inelastic such as food, such as power bills, such as insurance and rates.”

Hipkins also added the caveat that they did not have all the information the government did, and highlighted a seeming lack of certainty from officials.

“We had a briefing from officials this morning - they weren’t able to tell us anything about the changes in fuel specifications that they agreed to yesterday. They couldn’t tell us what that actually means in practice, they weren’t able to tell us how much storage there might be available, they weren’t able to tell us what might trigger an increase in the government’s alert level framework.

“We’re very much relying on publicly available information.”

Hipkins denies need to offer solutions

While Labour had “absolutely” been getting feedback from business and industry groups and real people and “they’ve all been telling us that they’re waiting to hear what the government are going to do for them”.

He continued to refuse to offer solutions of his own, however.

“We’re not the government … as an opposition with a handful of staff you don’t have the ability to put together at pace all of the options that the government can do.”

The Green Party’s own offer to support a government response on the crisis he dismissed as a “wishlist”.

“Good on them, but I’m not going to get into the territory of putting out wishlists of things unless I know how much they’re going to cost, unless I know how we’re going to deliver it.

“We will have answers on how we’ll support them in eight months time, but that is still a long way away.”

Luxon pointed to his conversation overnight with Prime Minister Lawrence Wong of Singapore, which refines about a third of the fuel that arrives in New Zealand.

He said supply of fuel was not a concern at this point, and pointed ahead to the fuel support package the government was set to announce in the afternoon.

“For our fuel importers they feel quite confident … their ships and their deliveries are still coming.

“We need New Zealand to keep working, we’re going to try and support people where we can with as much support as we can, but equally we also have to acknowledge that means we won’t be able to alleviate the pressure on everybody.”

He said an update on the government’s fuel plan towards the end of the week would lay out in more detail the triggers for starting to conserve fuel.

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