Cunliffe David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In CommitteeText is incorporated into the Bound VolumeCunliffe David: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — In Committee[Sitting date: 03 November 2015. Volume:709;Page:7684. Text is incorporated into the Bound Volume.]Hon DAVID CUNLIFFE (Labour—New Lynn): Thank you very much Mr Chairman—I appreciate it because we are getting near the heart of the matter here. As I said the Callaghan Innovation grants are not available to start-ups because they have not got $300000 to invest in research and development; they are absolutely scraping by and they do not have a 1.5 percent of revenue - track record that would allow them to get these non-discretionary grants. In the Callaghan system they are giving grants to foreign multinationals like for example Bayer and the Oracle America’s Cup syndicate—can you believe that? But in the detail of this bill in clauses 213 and 217 the excluded activities from this complex halfway house take an opposite approach and—quite rightly I think—exclude activities performed outside New Zealand.If you go down the list of exclusions in this bill there are some that we would agree with such as why would we give a tax credit to research and development done outside New Zealand? Fair enough—good move. Why would we give a tax credit to the acquiring or disposition of land unless it is directly related to the research and development? Good move; I agree with that one. However here are some that we certainly do not agree with: acquiring disposing of or transferring intangible property core technology intellectual property know-how or related activities. So when you are transferring—for example if you are in a high-tech cluster—intangibles or intellectual property from one part of the innovation chain across a company boundary to another you cannot claim the tax credit.Dr David Clark: Which clause is this?Hon DAVID CUNLIFFE: This is in clauses 213 and 217. This is a very unusual move because frankly it shows a misunderstanding of the nature of high-tech clusters where typically you have multiple firms working together to solve complex problems often taking specific parts not only of a business value chain but also of a software process even. So this makes no sense. What is really ironic of course is that at the same time the same Government in the Trans-Pacific Partnership negotiations is making it—The CHAIRPERSON (Lindsay Tisch): Order! That is not part of this bill.Hon DAVID CUNLIFFE: Mr Chairperson—The CHAIRPERSON (Lindsay Tisch): No.Hon DAVID CUNLIFFE: It is directly relevant.The CHAIRPERSON (Lindsay Tisch): We are not talking about the Trans-Pacific Partnership.Hon DAVID CUNLIFFE: I am not challenging your ruling. OK—I will come at that issue in a different way. Were it the case that while excluding a tax qualification for intangible property and intellectual property here somewhere else the Government was extending the life of the same forms of intellectual property protection and was making it harder for small businesses to get one and defend one then there would be a double jeopardy. It is excluded here and it is more difficult there. So again the gestation—the history—of this bill shows the Government tripping all over itself. It would have been so much simpler so much better and so much cleaner to have an across-the-board research and development tax credit properly defined with appropriate exclusions and to have it across the board and bankable rather than this cash-out loan which is so complex that most small businesses will not ever access it. One wonders: is it bad policy design or a deliberate public relations spin so that it looks like a proper tax credit but is in fact not one because it is not fit for purpose and is too complex for start-ups to use?Once again it is a bit like Child Support - lite or Working for Families - lite—or this lite or that lite. The Government has signed up to a concept that the Opposition has been evoking—finally. It brought something in that looks like half a loaf but it just will not work. It is just not good enough. What about the idea of having an accelerated depreciation rate for short-life high-technology plant and equipment? It sounds sensible—there is a body of international literature around that—but it is not in this bill in the same way. In fact the exclusions here include things like the acquisition or disposal of the intellectual property the commercial legal aspects of the patenting and licensing the excluded use of the services of developing through an external contractee the acquisition of intellectual property and excluding the cost of acquisition or transfer—again making it very difficult for small companies working in a cluster to access these benefits.The reinstatement of losses is contained in clauses 99 117 119 192 194 195 and 213—The CHAIRPERSON (Lindsay Tisch): I am sorry to interrupt the honourable member. The time has come for me to report progress.Progress to be reported presently.House resumed.The Chairperson reported progress on the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill no progress on the Weathertight Homes Resolution Services Amendment Bill no progress on the Radio New Zealand Amendment Bill and no progress on the Health (Protection) Amendment Bill.Report adopted.