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NZ will be less competitive with less government R&D support

Hundreds of fledgling New Zealand tech companies will feel the pinch if stimulating research and development grants are replaced with tax credits, NZTech chief executive Graeme Muller says.

Muller says tax credits have a place but New Zealand needs to be as competitive as other countries if it wants a faster growing economy.

The planned changes will help larger and more mature firms but overall they will be detrimental to high growth tech firms and this is not conducive for the fastest growing sector in the country.

“The current consultation process presents an opportunity to have a real good review of the structural set up and equity for all high tech companies. We also need to make sure the R&D incentives help both research and development – they currently focus on research and ignore development,” Muller says.

“We need to make sure that research and development software activities are adequately addressed and recognised in the further work currently being undertaken by officials and changes to growth grants are delayed until this process is complete.

“We have critical concerns that companies currently receiving the growth grant will most likely receive less support, reducing overall investment in R&D.

“As it is a tax-based scheme it will also automatically exclude most high growth software firms that which run at high levels of losses as they aggressively invest in product development (R&D) and market expansion.

“Further work needs to be undertaken to better understand the implications on high growth hi-tech firms, in particular software firms.

“New Zealand has a growing number of successful software firms like Xero, Pushpay, Soul Machines and Vend who spend significant amounts on R&D as their products need constant development.

“These firms run at a loss as they invest in global market growth and product development and yet will have no access to tax incentives as they are loss making.”

Muller says Australia is offering 38.5 percent R&D tax incentives with beneficial cashback schemes while Canada has an incentive climbing to 60 percent. While we acknowledge there are differences in the details, the top line number does send a signal of how serious other countries are about the importance of R&D.

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