Friday, 2 June 2000 Media Statement

Unfortunate rhetoric from the EMA

Complaints from the Employers and Manufacturers Association (Northern) about the Government's plans to introduce grants instead of tax breaks for research and development are unfortunate and poorly informed, says Minister for Research, Science and Technology Pete Hodgson.

Mr Hodgson was responding to comments today from EMA (Northern) chief executive Alasdair Thompson.

"In his haste to criticise, Mr Thompson has failed to notice some of the significant advantages of a grants scheme and has made some significant errors of fact," Mr Hodgson said.

"Mr Thompson does not, for example, explain how tax breaks would benefit high-tech start-up companies that are not yet paying tax. Such companies can benefit from a grants scheme. This was an important consideration for the Government, which wants to assist the growth of innovative new businesses.

"Mr Thompson misrepresents New Zealand's situation relative to the United Kingdom. The UK does not offer 150% expensing of R&D across the board, as his statement implies. Only a small segment of companies are eligible, and only for new and additional R&D.

"In fact some New Zealand companies will find they can effectively gain a benefit from the planned grants scheme that rivals a 150% tax writeoff. In some cases they will be able to expense R&D for tax purposes and get a grant for new and additional R&D as well.

"Mr Thompson fails to acknowledge the compliance costs that deter many Australian companies eligible for a 125% tax break from claiming it. The need for complex controls on eligibility is a typical feature of such tax schemes.

"Mr Thompson is wrong in saying the previous Government promised to allow full write-off of R&D. It did not.

"He is wrong to claim that this Government has 'lambasted' business for low R&D spending and I challenge him to produce a single press statement or speech to that effect. I have consistently told business audiences that this Government is determined to help business increase its R&D effort and will not just complain about the shortage of it, as did the previous administration.

"Business leaders such as Mr Thompson must distinguish between their need to articulate genuine concerns about Government policy and the occasional urge to indulge in unfortunate rhetoric. On this issue and inevitably on others, Mr Thompson does not speak for all business people and does not have a monopoly on wisdom."

ENDS

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