New Zealand Business Wary Of National's R And D Tax Credit Cuts

by Mary Swire, Tax-News.com, Hong Kong

17 October 2008

Plans by New Zealand’s main opposition National Party to cut the recently-introduced research and development tax credit and divert more money into funding for basic research has prompted criticism from a leading business organisation.

As part of their election manifesto, the Nationals have proposed to reduce the R&D tax credit, introduced in April, from 15% to 10% in an effort to save NZD105mn (USD64mn) over three years. The money would be redirected to fund science and research at universities and Crown Research Institutes.

However, Business NZ, New Zealand's largest advocacy group for enterprise, argues that, while commendable, the increased funding for science and research should not come at the expense of leaving less money for firms to invest in R&D programmes.

“The jury’s still out on whether the R&D tax credit will be the silver bullet, but it’s hardly helpful for National, as its first move in this space, to be reducing it and in doing so, send a signal that business-led R&D appears to be less valuable under a National Government than under Labour,” said Phil O’Reilly, Chief Executive of Business NZ.

“We haven’t yet had the chance to see if 15% is the optimal level at which to encourage R&D. Business NZ recommends a thorough review of R&D by any incoming government with a view to increase innovation investment and better linking of research institutions and businesses,” he added.

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