Genter Julie Anne: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeGenter Julie Anne: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second Reading[Sitting date: 20 October 2015. Volume:709;Page:7387. Text is incorporated into the Bound Volume.]JULIE ANNE GENTER (Green): The Green Party is supporting the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill. I will speak to the part that we are particularly excited about because it really does pick up a key plank of Green Party policy and reverses what has been the Government’s policy up until now.When the Government first came into office it cancelled the tax credits for research and development that had been instituted by the previous Government even though there was every sign that they were working quite well. In New Zealand we have a lot of research that says we are under-invested in research and development. Our companies tend not to spend as much money on research and development as companies do in other comparable countries that we would aspire to be more like and that is one of the things that is holding back our economic prosperity if you will in the world.There is a great book actually which I highly recommend to anyone watching this speech tonight called Get Off the Grass. It was co-authored by Sir Paul Callaghan and Shaun Hendy who is a professor at the University of Auckland and it is all about how to kick-start New Zealand’s innovation economy. It starts out by identifying a number of myths about what it is that creates the conditions for sustainable economic prosperity. In New Zealand we have a lot of myths that are perpetuated by the current Government—that New Zealand is terribly overburdened and overtaxed and we have got too much regulatory burden and that what we really need to do is cut regulations and cut taxes and then we are going to get richer. But if we look at the comparable countries in the world that have higher incomes per capita than New Zealand they actually do not have lower tax rates and they do not have a less regulatory regime. It is not easier to start up businesses in those countries.We have one of the most liberalised economies in the world and yet we have still lagged behind on incomes per capita. The question is why is that? Is it possible that those myths around the barriers to New Zealand’s economic prosperity are actually wrong and that what we do need to do is build on our competitive advantage which is our “clean green” brand? Although the current Government thinks that we have to choose between the economy and the environment the truth is that we cannot choose between those two. We cannot get richer by mining polluting and using up more of our natural resources. In the long term we will be poorer for doing that. The Green Party has an evidence-based economic strategy that builds on protecting our natural resources and protecting our environment not only because it is going to be good for us in the medium and long term and because it is going to mean New Zealanders can live better lives but also just because we do love our environment and we know most New Zealanders love our environment.What is the evidence base? The evidence base—and I am going to cite Sir Paul Callaghan and Shaun Hendy on this—is that we need to create the conditions for more innovation in New Zealand and one of the most simple ways to do that is through having something like a research and development tax credit. But when this Government came in it cancelled the research and development tax credits and then it set up Callaghan Innovation to try to direct money to incentivise research and development. But the problem is that with the way Callaghan Innovation is working it is not the most simple system. It does not reward all businesses equally for investing in research and development. It has a huge bureaucratic burden which makes it easier for the big players to apply for and get grants but makes it very very difficult for small companies and start-ups to get the benefit of investing in research and development because they have to have this incredible infrastructure in place to be able to apply.Of course there is another problem which is that Callaghan Innovation has been a little bit—I would say—politically influenced or at least that has been the criticism from a lot of researchers working here in New Zealand. For example a Crown research institute GNS Science applied for a grant to—sorry it was through Trans-Tasman Resources which is a majority foreign-owned company with a former Prime Minister as a board member. It received a big grant from Callaghan Innovation to attempt to mine the ironsands in the habitats and feeding grounds of Māui’s dolphins and blue whales. So not only are we not using Callaghan Innovation to pick winners that might have some positive externalities; it seems that the current Government is using Callaghan Innovation to pick winners that do the exact opposite which is to increase environmental degradation and basically incentivise an extractive approach. We should know from looking at comparable countries overseas that taking an extractive approach can never build long-term prosperity.But if we take another country that is very similar to New Zealand in size Denmark—it is admittedly located in the centre of Europe but it has a similar-sized population. Similarly to us it had an economy that was almost entirely reliant on simple commodity exports—primarily agriculture. What Denmark did over a period of a couple of decades was apply a whole set of policies that incentivised local value-added economic development. Denmark now has much higher incomes per capita than New Zealand. It is also reducing its greenhouse gas emissions and it also has much lower levels of child poverty than New Zealand. It is able to do all of this. When you look at a graph of its exports it is really fascinating because you can see that agriculture remains a very large portion of its exports. The overall size and value of its agricultural exports have not changed much over that period. They have slightly declined but Denmark has added all of these value-added sectors: high-value IT clothing manufacturing pharmaceuticals—a whole lot of other layers on top of agriculture and Denmark has almost doubled its exports and its GDP.When the Green Party says we cannot have an economic strategy that relies on doubling our production of dairy because our environment is simply not going to cope with that and also it is not going to make us better off—the profitability is not going to increase at the same rate; you get diminishing marginal returns—we are not saying that we should abandon agriculture completely. We are saying we can add all of these other areas and in order to do that we need to have a comprehensive policy.Right before the last election the Green Party announced a suite of policies that were aimed at incentivising a transition to a clean green economy one that is going to enable all New Zealanders to be better off and enable us to reduce our carbon pollution and reduce our greenhouse gas emissions which is going to be a winning economic strategy in the long term—and a winning survival strategy which is also good. One of the planks of that suite was a huge research and development package that included tax credits for research and development such as are contained in this bill.Also it is incredibly important not only to provide the carrot but also to ensure that the ground rules are in place because regulations are one of the biggest drivers of innovation. Our climate tax cut for example would put a price on carbon pollution at a manageable level. We would be indicating that there would be an independent climate commission that would be overseeing setting the price in future years but businesses would have the clear price signal that they need to invest for the long term in clean green low-carbon technology. By putting that price on carbon we are sending a signal to the market. Yes it might be true that it costs some jobs in highly polluting industries but what the Government never talks about is that that incentive—that regulation that price signal—actually creates jobs in clean green industries and that is exactly what we want here in New Zealand.So you have got the carrot if you will—the research and development tax credits; the direct investment in research and development; setting up a green investment bank which would be a low-cost way of setting up a fully commercial bank that would specialise and have expertise in clean tech which would facilitate private sector investments in those areas—and then you have got the carbon price which is not kept by the Government but actually recycled back to households and businesses in the form of a tax cut from the bottom so that all people benefit equally from it. That is the kind of evidence-based practical policy that the Green Party is proposing so that we can have a long-term sustainable future for all New Zealanders.We are happy to see that the Government has picked up one small part of that in this bill and that is why we will be supporting it. We look forward to it picking up more of our policy in the future.