The only publically 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, National’s Research, Science and Innovation Spokesperson Dr Parmjeet Parmar says.
“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.
“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 per cent will offer significantly less material benefit than growth grants which will therefore reduce the incentive to invest.
“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 publically released submission to date – we encourage the Government to publically 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.”
The Research and Development (R&D) tax credits policy introduced by Megan Woods is still short on detail and long on generalities after today’s estimates hearing, National’s Research, Science and Innovation Spokesperson Dr Parmjeet Parmar says.
“Today I asked the Minister several key questions on the policy, but she quite simply has not nutted out the finer details.
“She could not provide any information on the spending that will go into existing R&D in tax credits, any information on the estimated spending that will go into possible re-classification of work as research and development, and she could not give any assurances that she will be able to monitor rorting of the tax credit system to the fullest.
“When asked about the public investment increase required in research, science and innovation each year up to 2028 to increase R&D to 2 per cent of GDP, her answer was ‘significant’.
“And the threshold set for businesses of $100,000 R&D expenditure during a tax year is now open for discussion according to the Minister, as she tries to win support from innovative smaller businesses.
“The sector deserves a Minister with a better grasp of the figures from than what she demonstrated today.
“The financial risk of R&D is being shifted onto the businesses themselves, leaving them with the burden to develop new, innovative products and technologies with no promise of support from the Government.
“It’s simply not acceptable for New Zealand businesses that the Minister has done no homework on her flagship policy for the portfolio.”
The Government’s R&D tax credit policy has major flaws – it only benefits a small group of large companies, does nothing to help smaller businesses looking to grow, and will likely lead to rorting of the system, National’s Science and Innovation Spokesperson Parmjeet Parmar says.
Submissions are closing on the Government’s discussion documents today, and Dr Parmar has serious concerns about accessibility for a large section of the science and innovation sector.
“The removal of Callaghan Innovation Growth Grants mean many research intensive businesses will actually get less support for Research and Development,” Dr Parmar says.
“Most of our highly research active companies are currently getting 20 per cent of their R&D funding back through the Callaghan growth grants – which Megan Woods is axing. This will drop back to 12.5 per cent and only if you’re making a profit to set the credit against.
“Sadly most of the extra money will only go to companies that spend their time researching how to reclassify existing expenditure as R&D and give themselves a tax break. Indeed, Australia currently has had to redesign their own R&D tax credit scheme because of concerns with firms abusing the system.”
Dr Parmar says huge parts of the science and innovation sector are missing out completely because of Labour’s 12-year fixation on R&D tax credits.
“That’s not a commitment to innovation and high value products and services. It’s a plan for New Zealand to fall further behind other technologically advanced countries.
“This is a purely political move – Megan Woods is dumping the successful Callaghan Innovation Growth Grants only because they were put in place by National.
“We have been seeing big lifts in business R&D under the current grant-based system. The Government needs to convince the tech sector and the public that this change won’t just slow New Zealand down.”
The Government is planning to reduce support for business research and development in New Zealand’s fast-growing R&D intensive tech firms, National Party Research, Science and Innovation Spokesperson Parmjeet Parmar says.
“Hidden way down the back on page 31 of their proposal to introduce R&D tax credits is the news that they plan to cancel R&D growth grants at the same time,” Ms Parmar says.
“This will negatively affect hundreds of New Zealand’s most innovative technology focused companies.
“All of those companies will drop from getting 20 per cent of their research and development expenditure re-funded down to 12.5 per cent.
“And start-ups making a loss may have to wait until they are making a profit to cash-in any tax credit, that could take years compared to the current system which provides grant funding immediately.
“How is this supposed to grow R&D? How is it supposed to speed up development of our high-value tech sector?
Ms Parmar says that the change from growth grants to R&D tax credits will also lead to a big boost in business for accountants.
“When suddenly everyone can get a tax credit for any R&D, it will be amazing how much R&D your average business will find it was doing.
“All over the world these tax credit schemes are ripe for abuse, with their introduction always leading to a lot of ordinary expenditure being ‘reclassified’.
Ms Parmar says that it is telling that the Government’s first practical move in the science and technology sector is to reduce investment rather than increase it.
“These people have talked a big game in science and innovation for a long time. It’s sad for the science and tech sectors, and for New Zealand’s future, that their first move is to take us backwards.
“While small as a percentage of the economy, R&D has been rapidly growing under the previous Government’s settings. Ms Woods needs to explain how it will grow faster when they are reducing the incentive.”
New Zealand innovators could get a smoother path to success, as a Member’s Bill is drawn for debate in Parliament to provide intellectual property rights to advancements that may not qualify for a standard patent.
National Party Science and Innovation spokesperson Dr Parmjeet Parmar will introduce the bill which has been drafted after taking into account experience from European countries and Australia, especially the most recent recommendations for a similar initiative to make the Australian system more effective.
“My Patents (Advancement Patents) Amendment Bill will introduce a more accessible and cost-effective second-tier patent system that will protect novel creations that don’t qualify for the standard patent,” Dr Parmar says.
“I am very committed to providing innovator protection over the use of their creation through a second-tier patent system, providing an opportunity for visionaries and creative people to keep working on their innovations without fear of being copied.
“It will also provide forward-thinking people with the opportunity to commercialise their creation whilst continuing the vital research and development component of our economy.
“Protecting ideas and advancements will help New Zealand innovators to stay competitive and stand out on the international stage.
“I will be seeking cross-parliament support for this bill.
“We should not be waiting – we must promote the advancement of technology and my bill will help ensure that New Zealanders continue to benefit from their creativity and innovation with a system that better supports the development of new and forward-thinking ideas.”
A Member’s Bill has been lodged by National MP Parmjeet Parmar to better support New Zealand innovators by providing intellectual property rights to advancements that may not qualify as an invention for the standard patent.
“Protecting ideas and advancements helps New Zealand innovators and businesses to stay competitive and stand out on the international stage,” Ms Parmar says.
“My Patents (Advancement Patents) Amendment Bill will introduce a more accessible and cost-effective second-tier patent system that will protect novel creations that don’t qualify for the standard patent.
“Providing an innovator monopoly over the use of their creation through a second-tier patent system will provide an opportunity for them to further advance the creation with reduced risk.
“It will also provide them with the ability to commercialize the creation, just as the standard patent system would, without the fear of it being copied. This will enable them to contribute substantially to research and development and to the economy.
“My bill will help ensure that New Zealanders continue to benefit from their creativity and innovation with a system that better supports the development of new and forward-thinking ideas.”
Science and innovation Minister Megan Woods should stop re-announcing the previous Government’s R&D programmes and come up with some of her own, National Party Science and Innovation Spokesperson Parmjeet Parmar says.
“Ms Woods has attempted to fool the media by re-launching the MBIE Innovative Partnerships programme which was previously announced and launched by the National Government in 2016,” Ms Parmar says.
“It is clear that she has nothing new to say on research and development.
“The Ardern-Peters Government have spent so much on its bribe to university students that the word around town is that there will be no new funding available for research and development in this year’s budget.
“Labour has set a big target of lifting research and development spending to 2 per cent of GDP but they have no plan on how to get there.
“Ms Woods needs to stop re-treading the previous Government’s programmes and announce the detail of her own policies.”
With the 2018 academic year drawing near, questions remain around how our science laboratories will maintain a world-class standard given all the Government’s tertiary spending is going into student support with no extra money for the institutions themselves, National’s Tertiary Education spokesperson Paul Goldsmith and Science and Innovation spokesperson Parmjeet Parmar say.
“Surely the Government’s priority for tertiary education should be to improve the quality of education, which means investing more in the universities and polytechnics so that they can deliver world-class education that equips young New Zealanders to be globally competitive,” Mr Goldsmith says.
“Funding science laboratories to maintain the highest quality of education and facilities is essential if we are to ensure that budding Kiwi scientists can keep up with the world’s best.”
But Ms Parmar says that with all the new tertiary spending going into student support, we can be sure that there will be little to no money left to invest in maintaining and developing the quality of our science laboratories.
“Setting up a science laboratory with all the right equipment can cost tens of thousands of dollars, not to mention the annual running costs of such laboratories. But it’s money well spent if it means that New Zealand can continue to produce world-class scientists.
“It’s difficult to see the point of getting more students into tertiary education if the institutions are not even funded enough to be able to keep up with international standards. We should not be compromising quality of education for volume of enrolments.
“What makes this all harder to stomach is the fact that there will be barely any increase in enrolments so the Government can’t even justify the reasons why there will be no extra money for science laboratories.
“Not only this, but if we cannot maintain the quality of our facilities we can be sure that serious aspiring scientists will be taking their enrolments overseas,” Dr Parmar says.
The Government has provided absolutely no Christmas cheer for the science and innovation sector with no commitment in their Half-Yearly Economic and Fiscal Update for more funding for science and innovation, National’s Science and Innovation Spokesperson Parmjeet Parmar says.
“The lack of any plan or funding is very surprising given the Government’s lofty goal for science spending,” Ms Parmar says.
“They say they want to lift New Zealand’s research and development spending to 2 per cent of GDP – and yet they identify no plans to increase Government spending to assist with that.
“In fact the only thing they’ve done so far is reduce research and development spending by taking money from the Primary Growth Partnership and putting it into shuffling around the desks at the Ministry for Primary Industries.
“The Government needs to get beyond sloganeering and start coming up with real plans for the science and innovation sector.
“They keep falling back on the R&D tax credits but even those hardly rate a mention in the half-year update.
“They have an ambitious target and the clock is ticking.”
A law requiring newborns to be enrolled in a general practice before they are six weeks old is a step closer, thanks to a private member’s Bill submitted by National MP Dr Parmjeet Parmar.
Dr Parmar’s Newborn Enrolment with General Practice Bill passed its first reading this week. It requires all newborns to be enrolled with a general practice and primary health organisation before his or her first immunisation at six weeks of age.
“It is important that our children receive the best start in life, and National is working hard to ensure the Government provides high-quality health services for Kiwi families.
“Following on from Coroner Wallace Bain’s comments and recommendation this week to help reduce rates of child abuse, my Bill aims to improve health and social outcomes for newborns and their families through improved access to health care, and the opportunity for earlier detection of both health and social issues.
“By enrolling newborns with a general practice, we can ensure they are connected to various agencies and services including maternity care, Well Child Tamariki Ora (WCTO) services, immunizations, and primary care.
“My bill will ensure more children and families can benefit from these services,” Dr Parmar says.