English Bill: Taxation (Urgent Measures and Annual Rates) Bill — In Committee 
English Bill: Taxation (Urgent Measures and Annual Rates) Bill — In Committee 
[Volume:651;Page:172] 
Hon BILL ENGLISH (Minister of Finance) 
: 
 Well Dr Cullen is wrong about one thing. I do give him quite a bit of credit—or whatever the terminology was that he used—as easily the most competent member of the previous Labour Government. He did all the hard work and he has something to show for it but none of the rest of the members of that Government do including the previous Prime Minister. I give Dr Cullen full credit for the huge effort he put in while he was the Minister of Finance. 
That does not mean of course that he was right about everything and it does not mean that when the Government changes there will not be different priorities. That is really what this debate on the research and development tax incentive is about. It is an idea with some merit. The question is whether it has sufficient merit to be put ahead of all the other calls on the Government’s resources including what was National’s top priority in Opposition and what remains its top priority now that we are in Government and that is to reduce personal income tax rates. In the situation that New Zealand is in with the economic outlook that we face we have to make choices about priorities. Opposition members think the world is always the way that they experienced it when in Government; they experienced a fiscal tsunami every year of waves of money crashing on to the Government beach where they lazed around deciding among themselves how to give it out to someone. 
Hon Tony Ryall 
: Like some sort of version of  
From Here to Eternity 
. 
Hon BILL ENGLISH 
: That is right. It may well be that any Government in that situation would behave in the same way. I happen to think that Labour is more partial to enjoying giving out other peoples’ money than perhaps other Governments would be. But that was the business of Government. That has now changed. Now we have to make decisions about priorities. In the case of economic growth we did not believe that this tax incentive would be a sufficient driver of it. The Opposition believes that it would be. All I can say is the Labour Government floundered in the knowledge wave. After 7 or 8 years and hundreds of millions of initiatives driven off the idea that the economy could be transformed we ended up with a conversion on the road to Damascus whereby the only member of the Progressive Party suddenly decided that New Zealand was about primary production. Well that was fantastic. It just happened to contradict all the policy that that Government had tried to implement for the previous 6 or 7 years. 
The reality is that a National-led Government with a good understanding of and strong representation from the whole productive sector of the New Zealand economy is focusing on lower tax rates less regulation better infrastructure and higher education standards. Certainly we could focus on 16 other objectives. Every strategy of the previous Government that I read had about 16 other objectives—all contradictory none of them achieved but lots of meetings that gave the impression of action. Well we will not go down that path. 
We have discussed the research and development tax incentive with people who are using it and actually we get contradictory stories. One of the strongest advocates owned up in my presence that he had spent $70000 on the accountant and it turned out that the research and development tax credit was only $50000. The deal he had was to give the accountant 40 percent of any recoverable credit which I gather is the upper end of the going rate. Most accounting firms are pitching themselves at 20 percent to 30 percent. They turn up to a business with their Australian supervisor go through the books work out what the tax credit might be—it is turning out to be quite a bit smaller than many companies had expected—then take about one-third of it as their fee. Well that is innovative but it is not what we would call innovation. 
In Australia it is not 3000 highly productive companies that get this credit; banks and mining companies make up by far the largest number of claimants of this incentive. In New Zealand the banks have their own ideas of what they regard as research and development. They now represent themselves as being essentially information technology companies because they are based on information technology and any development that they do in that area must count for the research and development tax credit—and how would one say no to that? 
A research and development tax credit is not a bad idea; it is just that it is not the priority of the newly elected Government. We are focusing on basic things that will affect every organisation company and household such as lower taxes and better infrastructure.