Is a replacement for the dumped R&D tax credits on the cards?

As Sciblogger Shaun Hendy has pointed out, the Ministry of Research, Science and Technology has issued a feedback document on its priorities for science and technology and called for submissions on how to make the science system deliver more for New Zealand.

In the introduction to the paper, Science Minister Wayne Mapp wastes no time in pointing out a fact that many consider the reason for our comparative lack of economic growth relative to other OECD nations.

“The total government RS&T expenditure in New Zealand is 0.51 percent of GDP. While this is significant, it is less than in other countries. As a small country we have to make the most efficient use of our resources. We need to extend our knowledge base, stimulate scientific activity and harness the results to improve our economy and our society.”

We underinvest in R&D relative to other developed countries and R&D in the private sector is also relatively low. An attempt to stimulate the level of private R&D going on in New Zealand came from the former Labour Government, which introduced a 15 per cent in the dollar tax credit on R&D spend in private companies. That plan was scrapped when National came to power. But so far nothing has been offered as a replacement. But according to an NZBio report released this week, there’s an essential need for a replacement scheme to be introduced to stimulate investment in R&D. It recommended:

“By 2010, develop an alternative to the repealed R&D tax credit to stimulate investment by industry into innovative bioscience enterprises. Such a credit should take account of the needs of firms at various stages of their development and support the requirements of small, start-up organisations as well as larger firms. (e.g Boston Model — Massachusetts offers a tax incentive for research and development investment for both manufacturers and R&D companies.)”

The Independent noted this week the ambitious aims of other countries in the area of R&D:

When it comes to investment in R&D New Zealand lags well behind its OECD peers. In the United States the Obama administration has targeted 3 per cent of GDP as the necessary spend on R&D, while the Australian Government announced a A$42.4b ($52.2b) investment in innovation in this year’s budget. Innovation Waikato chairman Andy West, says New Zealand’s investment in R&D remained at around 1 per cent between 1980 and 2008; private sector input is a lowly one-third of the OECD average, while government investment is four-fifths. The graph below from the Independent illustrates our position compared to other countries:

rand d graph

The MoRST document doesn’t pay any specific attention to the R&D tax credit issue but the ministry has kicked off an initiative to look at ways of boosting private sector R&D and has a fairly tight timeframe for reporting back:

“The second initiative is looking at ways that business R&D investment can be lifted. This will examine ways to encourage businesses to engage in innovation, and how research organisations such as universities and CRIs can reach out to businesses more effectively and earlier. Recommendations on this will also be made before the end of the year.”

As the timeline featured in the MoRST feedback document suggests, the Government is looking to get the ball rolling on its strategy for changing the science sector quickly, with proposals scheduled to go to cabinet in January.

morst timeline

One Comment

  1. Grant Jacobs

    As someone with a bias (read: an interest in R&D tax credits), I’m curious as to what the game plan will be.

    I might blog about this sometime. My interest is with the very small players and most of the discussion seems to aim at slightly larger players or bigger. (The very small players generally are poorly represented in these panels, which may be one reason behind this.) There are a few twists at that level that you don’t get for larger players that might be worth airing.

    Thanks for the head’s up. (You too Shaun if you’re reading this.)

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s