The tax credit comeback
National axed R&D tax rebates in 2008. The new Government is planning their revival.
Companies will get a slice of their research and development spending back under the new Government.
Science, Research and Innovation Minister Megan Woods confirmed the Labour, NZ First and Green Government would be reintroducing research and development tax credits.
Under the scheme, companies wanting government money to keep up with technology trends will no longer need to apply for grants from Callaghan Innovation.
The National Party axed tax credits when it was elected in 2008. They were replaced by Callaghan, which handed out $113 million in grants to hundreds of businesses last year.
Woods did not outline any specific changes to come for Callaghan and, prior to the election, said her party was not proposing any, despite criticising National’s system as ‘‘bureaucratic’’ and ‘‘picking winners’’.
This week she said she would be meeting with government officials – likely from the Ministry of Business, Innovation and Employment and Callaghan – to discuss a rollout plan for the scheme.
Woods said Callaghan occupied a ‘‘really important space’’ in the innovation industry and more businesses undertaking research and development would be a ‘‘huge cause for celebration’’ for the agency.
ManufacturingNZ executive director Catherine Beard said businesses would welcome back tax credits, especially those that did not fit Callaghan’s criteria for grants.
However, she said the Government should ensure that applying for the tax rebates involved little paperwork.
‘‘Businesses are not keen on a high compliance cost … That would be an extra administrative burden.’’
The reintroduction of tax credits is not surprising, given the Labour Party, NZ First and the Greens all campaigned in support of bringing them back.
Labour’s campaign committed to a 12.5 per cent tax credit for R&D.
The Labour-NZ First coalition agreement, released this week, was light on detail about how they would ‘‘increase research and development spending to 2 per cent of gross domestic over 10 years.’’
Woods said that target was ‘‘ambitious’’ and solely reintroducing tax credits would not reach it, although she was excited to offer companies the option again.
‘‘I was working in the innovation sector when tax credits left … I know the disappointment companies felt.’’
The Manufacturers’ Network chief executive Dieter Adam said it was great to see tax credits return, but he was concerned that if Labour was only in government for one or two terms, the credits could easily be axed again by the opposition.
‘‘That would be a huge waste.’’ He said he wanted the National Party to sign an across-party agreement showing its long-term support for tax credits.
One week before the election, the former Science and Innovation Minister Paul Goldsmith said tax credits were not in National’s plans because they were difficult to budget for.
‘‘The problem with tax rebates is that it does complicate the whole tax system and it is very difficult to find out exactly what it is costing.’’
Goldsmith said accountants could easily write off business spending as R&D when it was not, meaning companies would get away with paying less tax.
‘‘Accountants are usually pretty innovative themselves … What you see is a reduction in the company tax.’’
"When tax credits left … I know the disappointment companies felt." Megan Woods