R&D Tax Credit Scheme raises doubts and concerns

Dr Parmjeet Parmar
Wellington, July 21, 2018
The only publicly released submission so far on the proposed R&D tax credit scheme will worry the Government as it highlights some industry concerns about whether the tax credit system will boost R&D investment.
The Government will be concerned that NZTech – an organisation that represents over 800 technology organisations in New Zealand – has raised a number of concerns it has with the Government’s proposed tax credit scheme.
Among NZTech’s many concerns is R&D tax credits will not benefit high growth firms that run at losses during periods of rapid investment in R&D.
Serious doubts
Because tax credits do not offer any cash flow relief to start-ups who are yet to return a profit, there are serious questions as to whether R&D tax credits will do anything to lift R&D spending given the importance that start-up firms play in driving R&D spending in New Zealand.
NZTech’s submission raises further concerns on the high level of uncertainty during the transition period away from growth grants.
Members also have issues around what will be classifiable as R&D expenditure and the fact that a tax credit rate of only 12.5% will offer significantly less material benefit than growth grants which will therefore reduce the incentive to invest.
No transparency
In light of the concerns raised by NZTech in their submission on the Government’s proposed R&D tax credit scheme – which is the only officially released submission to date – we encourage the Government to release all submissions.
Without such transparency, the public will be left in the dark as to whether abolishing the growth grant scheme, which has a proven track record of lifting R&D spending, is actually supported by industry players that undertake R&D.
Dr Parmjeet Parmar is Member of Parliament on National List and the Party’s Spokesperson for Research, Science and Innovation.
(Picture Supplied)