Webb DuncanDr DUNCAN WEBB (Labour—Christchurch Central): Thank you Mr Assistant Speaker. Look it's a pleasure to rise in support of this Taxation (Research and Development Tax Credits) Bill. It is really important to recognise what these tax credits will do because a grant of course is all very nice and no one's ever going to turn down an offer of money but a tax credit system really does demand from the business real accountability because it's real money that's being spent and a tax credit's only ever any good if it's ultimately claimed by a profitable business. That's part of the model. But we do know that research and development is going to be absolutely important in improving New Zealand's productivity as we go forward. As Mr Young mentioned 1.37 percent is our current GDP spend and we need that to go up. I did go to a very good session which was chaired by Mr Young on the kind of research and development that's going on in New Zealand particularly in the software space. It was a great event in a science forum on autonomous animation and human-machine collaboration and what was very clear there is that you can't always pick winners that as research is undertaken sometimes you get a breakthrough and sometimes you don't. One of the problems with a grants scheme is that the Government and Government bureaucrats set out to pick winners and you simply can't do it. What an R & D scheme does is it rewards and encourages businesses who are embarking on research of their own. One of the things that was changed in the Finance and Expenditure Committee in respect of this legislation was a much greater acceptance of software as a really useful and appropriate innovation. So in fact there was a cap of $3 million of expenditure in the original bill. That has been increased to $25 million of expenditure. When we think of the tax credits that can be claimed there that goes to show you the very significant investment that is being put into this tax credit.Now software does raise particular challenges because as we know particularly large businesses may well be developing software of their own. Large institutions whether they be corporate institutions or educational institutions they can spend very easily $20 million on their own internal software. So it was made very clear at select committee that those kinds of business-as-usual software applications that are developed in-house aren't appropriate and they won't be included in any tax credit regime. But there is a real sense that we need to meet the market so to speak; that a tax credit regime needs to wake up to the realities of how research happens. So there was a revisiting of the changes in identity of the parties claiming tax credits and in particular a recognition that joint ventures are a very important part of any tax credit regime. We need to accept that joint ventures from overseas can be participants with New Zealand parties in a regime of this nature. So what we have here then is a very effective way—and I must say that a 15 percent credit is a very significant credit when we think of the corporate tax rate. It was in fact taken into account and increased from some early suggestions of a slightly lower rate. So that really is going to reduce the tax burden of a lot of these businesses. It's going to be a significant reduction in the potential tax take of this Government and in light of that—in that sense—it really shows that this Government is committed to encouraging and entering into a partnership with businesses who are interested in embarking upon this. So I'm very happy with this bill. It went through the select committee in what was mainly a cooperative way; worked through and really improved as a piece of relatively technical tax legislation. This is another step forward in making our economy ready for the modern world productive and good for all New Zealanders. Thank you Mr Assistant Speaker.