Plan to axe R&D credit 'wasteful'
Relevant offers
National's plan to cut research and development tax breaks to help pay for personal tax cuts are "wasteful and confusing" and greatly disappointing for some firms, business leaders say.
National is moving "one step forward and two steps back" cutting government spending in the wrong areas, according to a manufacturers and exporters group.
Business New Zealand also disagreed "pretty seriously" with the decision to drop R&D tax credits but said the planned tax cuts and target to cut personal tax rates to 33 per cent over time rated a "seven out of 10" score overall.
The just-introduced research and development tax credits were expected to cost more than $200 million this year and more than $630 million over three years.
The regime applied for many businesses from April this year, allowing them to claim a tax credit of 15 per cent of eligible research and development spending.
Recently National said it would scrap the $700 million Fast Forward fund for agricultural research and move some of the R&D tax credit for business to fund science directly.
The Manufacturers and Exporters Association backed the personal tax cuts but said National was planning to cut spending in the wrong areas to pay for the tax cuts.
"The costs outweigh the benefits," chief executive John Walley said.
The change would push New Zealand back to the bottom of the OECD ladder in terms of government support for research and development.
Business had already spent money preparing for the tax breaks.
"Abolishing the credit now is extremely wasteful and confusing," Mr Walley said.
Business New Zealand chief executive Phil O'Reilly said cutting the research and development tax credits was "unfortunate and unhelpful".
Some companies had invested in accounting and reporting systems for the tax credit regime, and they would be very unhappy.
"So what is plan B if you are not using that [tax break] to encourage innovation?" he said.
There had been concerns from government officials that the tax breaks were open-ended and there could be a cost blowout.
The tax credit scheme came into force only in April and Mr O'Reilly said it should have been given more time to see if it worked.
KPMG tax partner Paul McPadden said the National plan to drop the tax breaks would disappoint many firms, and was a huge shift in policy from National, which only last week said it would reduce the 15 per cent credit rate to 10 per cent.
"Now it is being abolished, [if National is elected]" Mr McPadden said, which would mean an effective tax increase for some businesses.
Mr O'Reilly applauded National's tax cuts as generally sensible, rating an overall seven out of 10 score.
The plan to move to a broader, flatter tax structure would help boost economic growth.
"That is one of the most important things any government could do," he said.
- © Fairfax NZ News
Sponsored links
Shareholders query CEO's share option
Valentines may blanch at price of red roses
Cautious investors still favour term deposits
Zespri defends South Korea, China record
South Canterbury Finance five ready to fight
Fraudster accountant loses dispute
Delays with insurance frustrate port company
Miner hopes for hearing this year
Two more vineyards forced to sell
Hiring stalls as Christchurch rebuild slow
NZ's best farm land 'already sold off'
Hi-tech threat to public servants
Caring for these kids a job for life
Calls for flu tests after airport health scare
Mum cops $200 fine for truant daughter
Christchurch cordon deadline may not be met
Kiwi accused in $3m cocaine case
Tuhoe show support for 'Urewera four'
Lawyer Barry Hart faces misconduct charges
Rowing crewmates become rivals at nationals
Robbed retailers want cameras, not flowers
Murder weapon adds to victim's family's pain
Erin Baker our 'best ever', Adams looming fast
Dotcom accused van der Kolk 'flabbergasted'
One dead after SH1 crash near Wellington
Adele's the big winner at Grammys
Body found in Sydney tree identified
Police find woman's body in Manawatu
Woman crushed, friend watched 'helplessly'
NZ women's disappearances linked
Do you think a milk price war will erupt?
Related story: Another shot fired in milk price battle



