8. MOANA MACKEY (Labour) Link to this
to the Minister of Research, Science and Technology
What initiatives were in Budget 2009 to increase private sector investment in research and development, given recent reports showing business sector investment in research and development is at 0.51 percent of GDP—one-third the OECD average?
Hon Dr WAYNE MAPP (Minister of Research, Science and Technology) Link to this
The key Budget initiatives in Vote Research, Science and Technology were the increases in the Marsden Fund of $9 million, $8 million for the Health Research Council, and $10 million for the Crown Research Institute Capability Fund. The Crown Research Institute Capability Fund will enable Crown research institutes to better engage with business. But in addition to that, there is also the Primary Growth Partnership under the Ministry of Agriculture and Forestry vote. That is $30 million this year, rising to $70 million over the next few years. That will enable that ministry to engage very effectively with the primary sector. As the member knows, the Minister of Finance, the Minister for Economic Development, and the Minister of Research, Science and Technology are working on further improving firm-facing business assistance.
Does the Minister stand by his comments at the Education and Science Committee yesterday that New Zealand is not at a competitive disadvantage compared with Australia as a result of the cancelling of our research and development tax credits and the expansion of Australia’s research and development tax concessions?
Hon Dr WAYNE MAPP Link to this
Yes, I do. The problem with research and development tax credits—and this is well known amongst tax accountants—is that they are open to abuse. Essentially, people can re-categorise their expenditure and make those claims.
Hon David CunliffeHon Dr WAYNE MAPP Link to this
The evidence is actually accountants telling me that. That is the weakness of all tax-based claims of this nature.
Dr Paul Hutchison Link to this
How does expenditure on the Marsden Fund and the Health Research Council support business development?
Hon Dr WAYNE MAPP Link to this
One of the interesting things about the Marsden Fund, which is primarily for fundamental research, is how fundamental research can build businesses in ways that were not anticipated. A good example of that would be the BLIS Technologies example. In that instance the research came out of the Health Research Council and it led to the establishment of a particular company. It is the same with Syft Technologies, which came directly out of the Marsden Fund. It is a very interesting example. The study was actually about extraterrestrial chemistry. No one would have thought that would lead to a business entity, but, in fact, it did. That is the importance of fundamental research, and it is why the Marsden Fund benefits private business.
Who should we believe: the Minister who thinks that research and development tax credits are a bad idea, or the New Zealand Manufacturers and Exporters Association chief executive, John Walley, who said that research and development funding in New Zealand is not working and “the majority of our OECD competitors including Australia, the United States and the United Kingdom have incentives for R&D investment. R&D is an internationally mobile component of business, so if firms can get better tax rules elsewhere then R&D activity is likely to leave.”?
Hon Dr WAYNE MAPP Link to this
That is precisely why the Minister of Finance, the Minister for Economic Development, and the Minister of Research, Science and Technology are working on how better to get firm-facing support. For instance, the Government recognises the importance of TechNZ and it has continued funding it. When money is spent through TechNZ we know that it is going towards supporting a particular project. The problem with tax credits is that they are so susceptible to re-characterisation by tax accountants.