Parmar ParmjeetPart 2 Research and development tax credits: year 2 and subsequent yearsDr PARMJEET PARMAR (National): Thank you Mr Chair. I would like to start off with section 68CB as inserted by clause 43 which is about general approval: Research and development tax credits: general approval" which talks also about the preapproval process because from 2020 onwards there will be a preapproval process for the tax credit. What we heard before was a big lecture from the Minister in the chair saying that for grant applications people have to put in an application; so they have to spend some time filling in that application to access the growth grant. But what's going to happen with the preapproval process? For the preapproval process as well people will have to fill out some forms or maybe provide some information in some kind of format for the commissioner to consider that for preapproval. It's not like the commissioner is going to get a dream—what companies are going to put forward—and will be sending an approval or preapproval to that business without looking through what has been submitted. So of course there is going to be some kind of cost for businesses to submit what is going to be applied for preapproval.With preapproval something that is very interesting—and I think it will be good to hear from the Minister; I hope the response is going to be different from what the officials were saying defending this point—is that there is no time line for preapproval. So for the commissioner there is no time line for preapproval for any business when they're spending their money on research and development. If they are hoping that they're going to get some kind of incentive there has to be a time line because businesses need certainty and again I'm asserting this point of certainty for businesses because they're out there taking that risk spending their own money. It's not like taxpayers' money that you can spend without you know giving a proper answer about the outcomes that can be achieved. Businesses are answerable at the end of each year to their employees because they want to see that their employees are able to grow and their business is able to grow. They want certainty.So if a business has applied for a preapproval and they don't know when the preapproval is going to come the business will be sitting there thinking whether they should initiate that project—that spending on research and development—or not. So this is what is going to happen when there is no time line for approval. There was a submission when the bill was before the Finance and Expenditure Committee where the submitters said—it wasn't just from one group; more than one submitter said it—that there should be a three-month deadline for the commissioner to respond to requests to exceed the cap and this is for exceeding the cap. Also there were discussions around putting a time line around the preapproval process. So for exceeding the higher cap where businesses can get that preapproval so that they know that they can go ahead and spend that money—for that also they need certainty.So every business before they go out to spend their money they need some kind of certainty. What we heard during the select committee process was that imposing in the legislation this kind of deadline for responding to claims is not required. In its administration of the R & D tax credit Inland Revenue will set a performance standard for processing applications but does not think time constraints should be set in legislation. My question is: why should the time constraints not be put in the legislation? This legislation to some extent is quite descriptive; so time constraints should be there somewhere in the legislation or in guidelines because that will help us measure the performance of Inland Revenue measure the performance of Callaghan Innovation and help us measure the overall performance of this policy. If businesses have to wait for four or six months then that doesn't mean that the policy is as effective as is being claimed by the current Government.So my point is that there has to be some kind of time line for businesses to know how long they have to wait to get their preapproval—whether it's about exceeding the cap or whether it is about the general preapproval for their expenses. So a time line will help businesses plan their business activity. It will help them understand what kind of spending they can do on their business because some businesses could be committing to spend more just because they would be thinking that they are going to get an R & D tax credit but if it is not approved they are not going to get that and then they could actually be putting themselves in financial trouble.We know that in New Zealand most of our businesses are small businesses—96 percent to 97 percent of our businesses are small businesses—and we don't want to see our businesses getting into that kind of financial trouble just because the legislation doesn't put any time line for approval or preapproval of exceeding the cap or preapproval spending on—[Time expired]"