Parmar ParmjeetDr PARMJEET PARMAR (National): Thank you Madam Chair for this opportunity. I would like to start where I left off when I was speaking before. I was talking about the refundability provision in this legislation in clause 9 but I would also like to talk about some of the points that the Minister of Research Science and Innovation has answered. One thing the Minister said about clause 7 was that it will be to make sure that people don't have the intention to rort the system. How would the commissioner know that there is an intention? How do you measure intention? You cannot measure intention without providing proper criteria and I haven't heard anything here about the kind of criteria that would be used to measure that intention. Also the rate 15 percent—I totally agree that the bill is to implement 15 percent of tax credit but if somebody has spent $100000 on their research and development and they're expecting 15 percent $15000 in R & D tax credit but the commissioner decides to reduce that total amount then it would be just $5000. That means the effective rate or the amount that the person will get will be equal to only 5 percent. So that's the point. Saying that this will be applied to hopefully only a minority doesn't give a proper justification to have this kind of provision in this bill. So we need more than that. Just because it is going to be applied to a minority or may not be applied at all doesn't mean that we should tolerate something like this which hasn't been based on a proper criteria. Now for the refundability provision the maximum amount is lower than what people could access through the last R & D credit policy. When I was speaking before I was saying that the answer that we got during the select committee process was that because there is no year approval the pre-approval process kicks in from next year 2020 and in this part which is 2019-20 there is no pre-approval process. So the goal is to keep the whole scheme really tight. This actually conflicts with the whole idea. On one side we want to see that businesses are able to access this incentive so that they can spend more on research and development but on the other hand this is aiming to make it difficult for businesses. So I don't see a proper balance here because there is focus on making it tighter but then the focus on business is smaller.We also heard from the Minister when she talked about the integrity of this policy. The uncertainty that it creates for businesses wasn't addressed in the Minister's answer. So I think what we want to see through this legislation is that yes the Government should be able to control its policy control the spending and it shouldn't be a fiscal risk—which we believe it is going to be a fiscal risk as we have seen what has happened in other countries—but on the other hand providing that certainty to businesses so that they can go ahead and spend money on their R & D knowing that they are going to get 15 percent after incurring that expense. So here they do not get that certainty. In clause 10 looking at the activities which are called research and development activities they again are not consistent with other policies. Stats NZ use a different definition for research and development than this legislation—again another point that creates uncertainty. So how do we measure business spending on research and development when the definition in different policies is going to be different? Here it's different from what Stats NZ uses to measure business spending on research and development.The answer we had was that the Ministry of Business Innovation and Employment is going to look into it but that doesn't give us any assurance that it is going to be fixed. So we have this growth grant scheme which is continuing for another couple of years and then the growth grant scheme is going to be phased out. It is going to be only just one incentive and that is this R & D tax credit. The other policy is going to be developed. So having a temporary measure in here through clause 9 is creating uncertainty and again the definition of R & D which is different from other areas is creating more uncertainty.These things are really important for businesses. These things are really important for us to measure what kind of outcome we have from implementing a policy like this. We know that there is evaluation in new section LY 10. There is this evaluation provision that is after every five years the Minister will be required to provide a report on evaluation of the policy. In that one if we look through all the points which are listed from paragraph (a) to paragraph (f) under LY 10—that is Evaluation"—the first one is "the delivery of the policy intent of the regime". So how will it be measured? Again it goes back to the point that I raised previously. This is so preliminary that we cannot see how this policy will actually help us increase or understand that it has actually increased business spending on R & D. First the definition is different so it will be difficult to measure what kind of business spending is going on on R & D and then these points which are listed are quite vague. The second one is "the stimulation of spending on research and development activities". What does this mean? Does this mean that there will be more jobs created? Does this mean this is just about expenditure just about what dollar value will be spent by Government or spent by the private sector? What is the outcome here? There is a big focus on what is going to be spent rather than what is going to be achieved through this policy.Also how do we know that—because this is not fully developed; it is going to be developed close to the time. How do we know what is going to be the criteria that the Government will use to evaluate? It could be that just something that is looking good can be picked as a criteria because then the Government can easily stand up and say that yep the policies are working well. So there are a lot of questions. These kinds of things are very important for us to see in the start which are not available at the moment.Under new section LY 2 talking about consistency of this legislation and talking about consistency of research and development under "Core research and development activity" under LY 2—this is subsection (1)(b)—it says "does not include an activity if knowledge required to resolve the uncertainty described in paragraph (a)(iii) is—(i) publicly available". There is a lot of R & D work that goes around where only validated or publicly available methods are used because if validated methods are not used then they will have to first prove that the method was validated and only after it is validated can they progress their work. Someone somewhere else in this big world should be able to replicate that work once it's published. If they cannot replicate then there are questions that need to be answered. So here I would like the Minister in the chair Megan Woods to take a call and tell us exactly what this means.As a former scientist I know in biological sciences research there are a lot of validated methods that are used on a routine basis. That doesn't mean that they are not trying to acquire new knowledge. Of course they are trying to acquire new knowledge and the guidelines that are developed so far are not looking satisfactory at all. Saying that businesses will have to rely on the pre-approval process is actually creating a lot of compliance cost for businesses because businesses will have to list everything they think could possibly go through for their R & D tax credit and then they will have to wait for that pre-approval process to see what actually has gone through and not gone through. So that is not good enough.So this legislation—already we can see it's quite complicated legislation because part of the policy is different. So the policy that has already come into effect from 1 April this year—today's 30 April and we are debating this bill in the committee of the whole House. We can see how unorganised this Government has been in regards to this policy which they think is one of their biggest policies. So here I think that it will be really good if the Minister is able to give us an example of some biological science research or maybe in terms of oil and gas exploration. You know there are a lot of things which are publicly known and publicly available in terms of techniques which are used because it's important that validated methods and techniques are used to acquire that new knowledge. It's important that we have confidence that this policy is going to cover all areas of research not exclude some areas of research where they have to rely on getting pre-approval because that is going to be very hectic for businesses as I said. They will have to simply employ another person just to put that process together and then wait for pre-approval which we will talk about later on where I have some questions as well.So it will be really good to see what the Minister has to say about this LY 2 "Key terms" under "Core research and development activity" paragraph (b). What does it mean by publicly available? It's important for everybody to understand and also those who are doing R & D—for them it's important to understand this legislation so that they can go ahead confidently spend on R & D knowing that yep their R & D is going to qualify while they are waiting for pre-approval. They shouldn't be just holding their work until they get the pre-approval."