Shanks Katrina: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
Shanks Katrina: Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill — In Committee 
[Volume:644;Page:13703] 
KATRINA SHANKS (National) 
: 
 It is my pleasure to take this call to speak to the Taxation (Annual Rates Business Taxation KiwiSaver and Remedial Matters) Bill tonight. The area I would like to speak on tonight is research and development tax credits. Research and development is fundamentally important to New Zealand if we want to progress our country increase our productivity and be at the cutting edge of what we do. New Zealand is a small country and is quite boutiquey in what it produces so it is important that we invest and encourage investment in our research and development so that we stay at the cutting edge so that we can produce things in the global market that other countries cannot produce and so that we can demand premium prices for those products. When we do that we will find that our productivity will increase and that we will become wealthier and because our companies are doing so much better our country as a whole will become wealthier. 
The question really is how to encourage companies to do research and development to take their products to the next level by investing in their technologies and to be at the cutting edge in their industries. How do we actually encourage our companies to do this? It is quite a commitment especially as companies are struggling as it is to get ahead to pay employees and to go out to global markets because it is a big step to go from a domestic market to a global market. So how do we encourage our companies to reinvest back into themselves through research and development? 
It is really important when we look at these tax credits to go very slowly and look very carefully because there can be a downside to producing research and development tax credits in our country. It has been shown overseas that there have been major pitfalls when research and development credits have been put in place. The vehicle by which this bill is looking to increase the productivity of our businesses and to encourage our companies to invest in themselves is this research and development tax credit. 
I was not on the Finance and Expenditure Committee that considered this bill. Shane Jones the previous chair of the committee was in the Chamber but has lost interest and wandered off but I see that Charles Chauvel is here tonight. He is the present chair of the committee. He is sitting across the Chamber and has taken one call tonight I do believe. 
How do we know this is actually the correct vehicle to use in research and development? Officials from the Inland Revenue Department I believe came and briefed the select committee. As this policy is based essentially on the Australian tax credit policy in relation to that country’s Inland Revenue Department Shane Jones the chair of the committee at the time asked our Inland Revenue Department officials who came in to brief the committee on this part of the legislation whether there was any evidence that the research and development credits in Australia were making a difference and actually working. The officials said that they did not know whether they were making a difference. I do believe reading through the minutes that Shane Jones asked that question of the officials more than once and each time they came back and could not say that these research and development credits were actually making a difference. Yet we have still gone down this path which is really interesting. 
We are all keen to get research and development moving along in New Zealand and we are all keen to invest in research and development but it is actually about finding the correct vehicle. It is about ensuring that we have enough submissions in that enough research has been done and that the officials have the answers to the questions we ask when putting this type of legislation together. This is what we need in order to put together the right type of legislation with the right vehicle in it for our companies and for New Zealand so that we do this very precious research and development. That is what this is actually about. We have to remember that in New Zealand research and development is currently 100 percent deductible for tax purposes so already companies are getting 100 percent back. This legislation basically gives a credit at 15 percent tax rebate on top of the 100 percent deductibility already.