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Smart Future or Dumb Future

Hon Pete Hodgson

21 October 2008 Media Statement

Smart Future or Dumb Future

“If Endace leaves New Zealand, our country could be dumber.”

That was the message Labour economic development spokesperson Pete Hodgson delivered when he opened the Endace R&D facility in Ellerslie this afternoon.

Endace, a high growth ICT company, is contemplating shifting its R&D to Sydney if National wins the general election because it will be cheaper.

“Our nation needs more rapidly growing spinout companies like yours. If we are to lift our productivity, create jobs for skilled New Zealanders and increase our exports then we need more Endaces starting up and no Endaces clearing off to Australia.

“Companies like yours are the least likely to take profits out of the business, and the most likely to plough profits back. Companies like your will grow much faster if your R&D efforts are rewarded by a reduction in taxation.

“One of New Zealand’s inconvenient truths is that private sector expenditure on R&D is almost exactly one-third of the western world average. Yes, New Zealanders are an innovative lot, but our companies are painfully bad at investing in R&D and commercialising R&D successes. The lack of a tax incentive until 1 April this year is one reason why.

“When the tax credit was introduced, officials at Inland Revenue had to work out how much tax would be foregone. Their modelling calculated that the full effect would be $332 million a year, enough to drive reported private sector R&D expenditure from one-third of the western world average to almost exactly two-thirds.

“Not bad. Imagine the value of that increase on the growth of smart businesses, the growth of high-skilled employment and the growth of non-commodity exports. Then imagine the value to our institutions – universities, crown research institutes – who would capture part of that increase by winning research contracts.

“Finally, ask how much extra money would go to individuals if National were to cancel the tax credit and give all of us the proceeds. My calculations are that each person would be better off by $1.60 per week. A smart future, or a dumb future plus $1.60 per week? I say that cancelling the tax credit would be a very stupid thing to do.”


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