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R&D tax incentive discussion document - Expert reaction
R&D tax incentive discussion document - Expert
reaction
19 April 2018
Minister for
Research, Science and Innovation Megan Woods and Revenue
Minister Stuart Nash have released a discussion document on
a proposed Research and Development tax incentive.
With New Zealand's gross expenditure on R&D currently at 1.28 per cent, this puts the country behind the OECD average of 2.38 per cent. The Government has set a target of increasing R&D expenditure to 2 per cent of GDP by 2027 and has proposed a tax incentive to come into effect by 1 April 2019.
The discussion document is available on MBIE's website: consultation is open until 1 June.
The Science Media Centre has
asked experts to comment on the discussion document, please
feel free to use these comments in your reporting. Further
comments will be added to our
website.
________________________________________
Professor
John Raine, Pro Vice Chancellor – Research and Innovation,
Auckland University of Technology comments:
"At the time of the Powering Innovation Review that I chaired for the Ministry of Science and Innovation in 2011, the gross investment in R&D in New Zealand was about the same as today. Our 2011 report recommended to Government that this investment be lifted to the OECD average within ten years. New Zealand has failed to make progress on this despite investments in business R&D by Callaghan Innovation and an increase in business investment in R&D.
"The introduction of a 12.5% tax credit system, with a generous $120 million cap per annum, should stimulate more business R&D investment and this will be welcomed. Some care is needed in the way in which R&D is measured and accounted for to be able to see true gains in investment. The prescriptive definition of qualifying and non-qualifying R&D in the announcement should assist this.
"Alongside the introduction of the tax
credit, ongoing efforts and incentives are needed to achieve
stronger connections between the research sector, business
and industry, particularly to grow R&D engagement in the SME
sector. We also want to see a higher level of R&D investment
in larger companies. I believe the cultural shift to seeing
R&D as an investment rather than a cost will be as important
as the availability of tax credits in lifting the level of
R&D in New
Zealand."
________________________________________
Professor
Shaun Hendy, director, Te Pūnaha Matatini, University of
Auckland, comments:
"New Zealand’s spending
on research and development, both by government and the
private sector, has remained stubbornly low for decades.
This has inhibited our ability to grow our economy
sustainably, and has led to economic performance that has
been anaemic relative to other advanced countries.
"Late in their last term, Helen Clarke's government sought to address this via the introduction of tax credits for research and development, but these were axed by the incoming National government and eventually replaced by direct grants to firms through Callaghan Innovation. Evidence for the effectiveness of this direct grant system has been mixed, so it is not surprising that the new Labour-led government is looking at an alternative.
"I think R&D tax credits have some advantages over direct grants for New Zealand, but I don’t think there is a single silver bullet solution to lifting our R&D spend. Hence I would like to see this policy become part of an integrated strategy that signals a long-term commitment to valuing innovation in New Zealand."
Conflict of interest statement: I am Director of Te Pūnaha Matatini, a TEC-funded Centre of Research Excellence, and am involved in an MBIE-funded research project that is looking to develop quantitative measures for developing and evaluating innovation policy.
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