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Bill format for Research and Development

crime minerals petroleum Amendment Bill second reading I call on government order of the day number two interrupting debate on the first reading of the taxation research and development tax credits bill I call Andrew Bailey mr. speaker it's a pleasure to be talking on the taxation research and development tax credit bill first reading and I want to start out by saying that national is keen to support creative New Zealand businesses to help them grow and prosper this not only proves providing the right economic environment for them to flourish but also the ecosystem for younger businesses to flourish reducing Texas ensuring laws are kept to a minimum and other such measures are all pad of creating that environment but Aaron T is also an important part is R&D research and development has the potential to drive the growth in this New Zealand economy by not only increasing the size of businesses in New Zealand but actually by diversifying the activities that are good companies undertaken news in now exciting in terms of the new creative industries that are occurring and the tools that will be adopted in the future we is it's when you go and talk to these businesses that the growth and things like robotics AI technologies are always going to be there in our important facet in terms of further growth of our businesses but that is why the New Zealand national government has always been keen to assist companies with R&D and the Callaghan growth grant scheme was part of that program that we put in when were in power and I think that's slightly perverse that when the Prime Minister was recently at Methvin on the 3rd of October waxing lyrically about high-growth company and the importance of R&D David Benefield presented her with the latest technologies and share head developed by Methvin and of course that new technology came out of the direct support from the Callahan Grants Scheme and which over the last year gave away approximately 150 million a year but the government has chosen to do away with the Callaham scheme and revert back to a steam that previous labor governments have put in place that is one based around a tax credit scheme where companies undertake activities R&D activities and then they're entitled to offset 15% of the total expenditure incur and use that as a deduction against their future profits in this scheme that's been put forward here's big bucks it's a billion-dollar program and the minister's claim that at that businesses will be better off as more companies will be covered by this new scheme initially she claimed that 3,000 businesses would be would benefit and then that was reduced to 2,000 now in the scheme of how many businesses we have in operation used in a nearly five hundred and thirty thousand businesses it was interesting that officials providing advice on this new scheme said that 85 percent of the government's tax payments will go to approximately about three hundred and thirty firms in essence what they're saying is there is a very small clutch of businesses that are responsible for most of the research and development of New Zealand and of course that cuts across the whole concept of trying to provide R&D to a whole raft of companies the second issue with this scheme is how the minister knows that only one billion will be spent and that's an interesting question in the Australian R&D tax incentive scheme which is very similar to what's been proposed by the minister in this bill they originally budgeted for a 1.8 billion was increase or scheme research and development scheme and that was put in place in 2011 that subsequently blew out by roughly half to 3 billion dollars and that's the nature of the scheme that's been proposed by the government now the minister has claimed that no no that's not going to happen with the scheme and she's going to put in mechanisms to make sure that that doesn't take place that we do not have a ballooning of the 1 billion to 2 or 3 billion but there has been no further details provided by the minister as to how she will ensure that there is not such a substantial blow out the advantage of the Callahan scheme the scheme that's currently in place is that it is fixed and it's one where the budget is divided and directed at the highest priority research and development companies and this is the one area of particular importance that we will be ensuring is addressed adequately in the Select Committee stage the other issue with this bill is around enforcement and this is a big issue because journey what happens and this happened when the previous scheme is in place is that there are rules around which activities should be will be included and can't be included and in the schedules there are 24 activities that are excluded and 11 other areas that are excluded from supporting R&D now it's interesting things like the cost of incurring and obtaining patents is actually one of those that are excluded in this R&D expenditure however rules create the opportunity for interpretation and this is the issue commonly referred to routing these schemes are open to widespread claims by people to say that what would otherwise be normal business expenditure and cure are subsequently reclassified as and development and this is a real possibility again we will be highly vigilant during the select committee stage as to whether and what measures the minister will be put into place to make sure that that does not take place the other thing and this is one of the biggest concerns for us is that this bill is totally silent on the issue of supporting those young innovative creative businesses made up of wonderful New Zealand men and women who every day are seeking to fill their dreams by creating new products and services and there is incredibly high work hard work and these people often put themselves at a financial disadvantage to be able to go and do it but these are the success stories of the future and we want to see more of them succeeding and I think one of the things we can do is we need to see how we can support a national was very conscious of it and when we were impaired we put into place two provisions one was around and based in regard to startup businesses or pre profit businesses one was to provide a real tangible benefit which was to the extent that any tax credit equivalent amount of 15% of the expenditure they could take in the form of cash which is the most precious element apart from their time in terms of helping them to continue their research and development and that cash out clause was an important and tangible measure that we put in place the other thing we put in place was the ability to deduct what's otherwise Tim blackhole investment which is expenditure that's incurred in doing R&D that sometimes cannot be deducted against future profits and again we came up with practical measures to make sure that those black hole investment expenditure could be depreciated and actually taken into account but again this bill is absolutely silent on the issue of startup companies and I think that's a great travesty this government should particularly be concerned about the representation from New Zealand Tech representing over 800 startup technology businesses and by the way New Zealand technology businesses are huge in a large part of our GDP and they that organization made it clear that these proposals do nothing for their members and there is a travesty so we where we got to I won't behave the National Party I want to say that we support plans to help New Zealand businesses to grow and prosper that's an absolute given we understand that the the value of Rd that can be that at plays in terms of helping our economy to diversify and to create high-value jobs and in many cases they have very high value jobs and approached me just hit the debate around the oil industry we're not persuaded that this package will work and I've noted some of the specific elements before but we will be supporting this bill through to the Select Committee with because we want to hear from businesses about the specific elements of this package but I do say that we give no guarantee of us who support beyond that because of the significant concerns I've already raised I I call to the top availa I did not create among my mr. speaker