Could we take GST off our power bills? - Ask Susan Edmunds

The question of whether GST should be removed from power bills has sparked debate among economists, consumer advocates, and politicians. In a recent episode of the No Stupid Questions podcast hosted by Susan Edmunds, listeners raised concerns about the impact of GST on energy costs, especially given the state’s 51 percent stake in power companies. The discussion highlights the complexity of tax policy in relation to essential services and the broader economic implications of such changes. Jon Duffy, chief executive of Consumer, acknowledged the appeal of removing GST from power bills as a way to reduce household expenses, particularly during periods of rising energy prices. However, he warned that doing so could complicate tax administration, increase administrative costs, and reduce government revenue. This loss of revenue could limit the ability of the government to allocate funds to other public priorities. Additionally, Duffy pointed to historical examples, such as the clean car subsidy, where the absence of oversight led to higher prices for consumers despite intended discounts. He argued that similar issues could arise in the electricity sector due to the limited competition among generators and retailers. The conversation also touched on the broader issue of how essential goods and services are taxed. While some argue that items like food and energy should be exempt from GST to make them more affordable, others caution against creating loopholes that could allow businesses to exploit the system. In the case of supermarkets, Duffy noted that removing GST from groceries could lead to price hikes as retailers seek to maintain their profits. This concern extends to the electricity sector, where the dominance of a few major players raises questions about whether removing GST would truly benefit consumers or simply shift financial gains to private entities. In addition to the economic debate, the episode featured a personal finance inquiry from a listener who is nearing retirement. The individual has multiple investment accounts, including KiwiSaver plans, a UniSaver, and a low-cost index fund. They are considering whether to consolidate these accounts or continue managing them separately. Ana-Marie Lockyer, chief executive of Pie Funds, advised that while consolidation can simplify management, it does not inherently improve diversification unless the accounts are invested in different assets or markets. She emphasized the importance of treating all accounts as part of a unified retirement portfolio and evaluating factors such as fees, investment strategies, and accessibility of funds. Lockyer also highlighted the value of employer-sponsored accounts, noting that the listener’s partner could still benefit from maintaining his KiwiSaver account, especially given the possibility of future policy changes. She recommended exploring the potential for additional employer contributions under proposed reforms. Meanwhile, she cautioned against automatically moving the existing index fund into KiwiSaver, citing the advantages of maintaining separate accounts for greater liquidity and control over investments. As the discussion unfolded, it became clear that both the taxation of essential services and the management of retirement savings involve nuanced considerations. While the removal of GST from power bills may seem like a straightforward way to ease financial burdens, its implementation would require careful analysis of its effects on government revenue, business behavior, and consumer welfare. Similarly, the decision to consolidate or retain multiple investment accounts depends on a range of factors, including investment goals, risk tolerance, and long-term financial planning. Looking ahead, the ongoing dialogue around these topics suggests that policymakers and financial advisors will continue to grapple with balancing affordability, efficiency, and equity in both taxation and retirement planning. As new policies emerge and market conditions evolve, the insights shared in the No Stipped Questions episode will likely remain relevant for years to come.