Bayly Andrew: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second ReadingText is incorporated into the Bound VolumeBayly Andrew: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — Second Reading[Sitting date: 20 October 2015. Volume:709;Page:7391. Text is incorporated into the Bound Volume.]ANDREW BAYLY (National—Hunua): It is a pleasure to be talking on the second reading of the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill. Before I start talking about the bill I just want to acknowledge some of the wonderful contributions to this debate tonight. I am particularly impressed with my colleague Mr Jami-Lee Ross who like a laser took us to clause 65 which of course is an exceptionally important clause of the bill and also the very pithy and succinct contribution from Mr Stuart Nash which I thought was valuable.In terms of this bill obviously it is a continuation of the Budget and it really covers four parts. The first part is about encouraging innovation in the New Zealand economy. Of course this Government has a very ambitious target to see our research and development spend in New Zealand increase significantly not only through what the Government itself spends but also through what the private sector is contributing. So the first part is really about dealing with those entities that undertake research and development but under current tax laws they can only carry forward their tax losses relating to those research and development activities.For large firms that obviously does not matter because they have got other research and development activities they can write expenditure off against but this is a real barrier to our small to medium sized enterprises and the importance that they have in the New Zealand economy. So what this bill does is allows those firms to access those tax losses at 28 percent i.e. the current tax rate and of course there is an increasing scale—the first year $500000 and by year 5 they will be able to draw down or claim a maximum of $2 million a year. I think that is a very valuable cash-out clause. Of course if those entities do make a subsequent profit they will have to remit those tax losses against those future profits.The second thing this deals with in terms of research and development is the issue of black-hole expenditure. For those who do not understand the concept that is where expenditure cannot be deducted—i.e. it must be capitalised on the profit and loss statement or through the balance sheet. So this bill introduces two provisions. First of all it allows this capitalised development expenditure either to be depreciated which previously it could not be or to be taken as a one-off write-off. And again this is good stuff for New Zealand and good stuff for New Zealand businesses in terms of promoting research and development.The fourth issue this bill deals with is the issue around bodies corporate. This is a Government that has listened to submissions on this issue. Of course bodies corporate at the moment unless they are registered for some purpose for GST cannot actually claim back their GST. So this bill makes it explicit first of all that the services it provides as a body corporate are deemed to be services and therefore are rateable for GST and secondly if the body corporate wants to register as a GST entity then of course it can then take the wins from both the GST that they receive and pay.Finally this bill deals with penalties relating to the liabilities around child support. As many people know there is a significant liability that is built up—roughly about $3 billion. As the previous speaker Mr Fletcher Tabuteau acknowledged about 77 percent of that is encompassing penalties. What this bill is about—and this is the bit I really like about this bill—is that it is enabling the Inland Revenue Department to take a much more pragmatic approach so we can actually address this issue. We want parents who are not paying their child support to be involved in paying and it is good for families. So I look forward to supporting this bill and working our way through it. I commend the bill. Thank you very much.