1 Nov 2018

R&D tax credit: 'The devil is in the detail'

8:16 am on 1 November 2018

National is switching sides and will support the government legislation to implement the research and development tax incentive.

22082016 Photo: Rebekah Parsons-King. Caucas run. Paul Goldsmith

Photo: RNZ / Rebekah Parsons-King

But it will only do so through the first reading, so it can be scrutinised at select committee.

The party's revenue spokesperson Paul Goldsmith said successive governments had differing views on the best way to stimulate research and development but what the sector needed was certainty.

He said National had long-standing concerns about the effectiveness of tax credits.

"They're susceptible to all sorts of trickery and rorts. The accountants are very innovative and people come up with all sorts of stuff.

"The other thing is they don't offer much help to start-up companies. If you're a company that doesn't have a profit for the first 10 years then an R&D tax credit doesn't help, while a growth grant might."

The government initially announced the credit at 12.5 percent but raised it to 15 percent.

It means 15 percent of research and development spending over $50,000 will be credited, but there is also a cap in place of $120 million, meaning the maximum tax credit that can be claimed is $18 million.

Research, Science and Innovation Minister Megan Woods was pleased to hear National was supporting the bill.

She said an incentive was the "gold standard" of increasing research and development spending and New Zealand had been an outlier among OECD countries for not having one in place.

The previous government's preferred option was a growth grant scheme operated by Callaghan Innovation, which will be phased out and replaced by the tax credit by 2020.

Mr Goldsmith said what people wanted was certainty.

"Businesses that have been wanting to plan over many years are seeing all this chopping and changing and they find that very frustrating.

"So that's why we're prepared to support it at first reading and work as constructively as we can with the government through the select committee process to come up with something that works.

"The devil is in the detail and that's what we've got to figure out - and we may or may not get there."