Hutchison Paul: Taxation (Urgent Measures and Annual Rates) Bill — In Committee 
Hutchison Paul: Taxation (Urgent Measures and Annual Rates) Bill — In Committee 
[Volume:651;Page:164] 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 I am grateful for the opportunity to speak on Part 2 “Research and development tax credits repeal”. This is a very sobering part and it has been undertaken with great thought over a period of time— 
Hon David Cunliffe 
: Minutes! 
Dr PAUL HUTCHISON 
: That is quite wrong. This move was indicated quite clearly in National’s pre-election policy and the great concern was about the quality of the investment. If we look around the world we see one of the points made in Australia’s innovation policy of 2002 is that unless the basic business environment is optimal it is very hard for research and development and innovation to thrive. This is underlined in the foreword to the policy where the point is made that it is very important to have a low broad-based simple tax system that it is important to have a flexible labour market and that it is important to have an optimal regulatory regime. 
All these things will be carried out by the National Government and the direct opposite happened unfortunately under the Labour Government. Nevertheless there was a question at one stage of events of whether 10 percent of this tax credit would remain. However due to the extraordinary circumstances—the legacy of the Labour Government—that were established in the pre-election fiscal update whereby the seriousness of the international crisis was beginning at last to be felt and certainly was ignored very largely by the Labour Government the realisation was that it was inappropriate to continue with this tax credit. 
It is important to remind the Committee that in the select committee prior to this tax credit coming into being it was opposed by the major accountancy firms it was opposed by Treasury and it was opposed by Business New Zealand. However once it did come in the major accountancy firms set up a travelling roadshow around the country to give people an opportunity to use the tax credit. The great danger was that it would not be a quality investment research that was going to be carried out anyway would be carried out there would be new business activities that were inappropriate to research and development and on balance it was felt that in these dire economic times—times left as a legacy of the poor management of the Labour Government—it was appropriate to repeal the tax credits. 
I for one am absolutely committed to championing the evolution of research and development in New Zealand into the future. But we want to ensure that the spend is a quality spend and I am quite sure that over time the National Government will achieve exactly that. I remind the Committee that in the Hon Bill English’s media release of 9 December he stated: “We firmly believe in the importance of research and development to keep New Zealand internationally competitive but the tax credits aren’t the most effective way to ensure that. We will work with business to better target government expenditure on innovation.” 
I am sure that Mr Hodgson must feel very disappointed given the fact that he worked on this matter for about 9 years. I think it was back in 1988—or maybe 1998—when he proposed that such a thing should happen. Once again it took 9 long years and more. It was almost equivalent—