Bayly Andrew: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — First ReadingText is incorporated into the Bound VolumeBayly Andrew: Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill — First Reading[Sitting date: 11 March 2015. Volume:703;Page:2161. Text is incorporated into the Bound Volume.]ANDREW BAYLY (National—Hunua): It is a pleasure to be standing here in support of the Taxation (Annual Rates for 2015-16 Research and Development and Remedial Matters) Bill. This is an important bill as it is part of an ongoing reform of our taxation system aimed at making our tax system fairer and simpler. Let us be clear: New Zealand has a tax system that is the envy of the world. It is simple to understand it is simple to implement it is transparent and it is not subject to a whole lot of exemptions and complexity. That is why we do not want our Opposition in power as it would want to introduce a whole range of additional taxes—and I spoke about this earlier. These would complicate our efficient tax system. The difference with this bill is that it is about reducing tax on our families in need. It is about reducing tax on income from work and net savings. It is about raising the effective tax rate on property development. Fourthly it is about providing additional funding for the Inland Revenue Department to target property speculators and tax avoiders. And fifthly it has brought in stricter rules to ensure multinational companies contribute their fair tax in New Zealand.I want to concentrate on some of the elements of this bill. Firstly it is quite simply about ensuring that those in need pay less taxeffectively. I am proud to be part of the Government that—these changes now mean that after taking into account support payments households earning less than $60000 a year pay no net tax at all. To put this in context those with a family of three children and earning $48000 a year after taking into account Working for Families support earn effectively $73000 per annum. That is fantastic and when I look at some of the families living in my electorate this is an important contribution to improving the lifestyle and standards for those families—in particular their children. This is a Government that has a heart a soul and a desire to improve the well-being of all New Zealanders.Secondly part of this bill is about creating the right environment to encourage companies to invest in research and development. This Government has been very focused on growing the economy even faster than we have achieved in recent times and I have already noted earlier tonight that we have achieved above-normal growth rates in the last year and projected over the next few years. Our objective is for the Government to reach a stage where it is contributing 1 percent of all GDP into research and development funding by 2018 and we are well on the way to meeting that target.We have got some wonderful examples in this country of where companies have benefited from Government support to achieve very successful results. Picking up on the talk of the Greens member Gareth Hughes one of those examples is LanzaTech a company with world-leading technology to process flue gases generated from the emissions from steel-making. They are now involved in a major pilot plant in China. This was very successful technology that is now being applied worldwide.Another example is PowerbyProxi a great Auckland-based company that had its genesis out of Auckland University. It is now a leader in developing a range of exciting new technologies and intellectual property. Interestingly it measures success in terms of the number of new patents it files which is a great measure to adopt. Again I note what the earlier speaker said—here is a company actually focused explicitly on achieving patents and seeing how they can be deployed successfully into commercial applications. Another example is Serko recently listed on the New Zealand Exchange. Again it benefited from research and development funding to fast track the development of a number of its products. A fourth example is the very successful Xero which also benefited from technology development grants to continue help it exist and expand its export growth.This bill goes further to support businesses that are prepared to commit to investing in new technology and intellectual property for the benefit of all New Zealanders. Specifically the bill amends the Income Tax Act 2007 to do two things. First of all it allows tax loss - making research and development companies—normally they are start-up companies—to cash-out their tax losses from research and development expenditure. The amount is initially capped at $500000 but this Government is increasing that by $300000 so that eventually the cap will be $2 million. Secondly it is going to reduce the distortions that occur from what is called black hole research and development expenditure. The proposed amendments seek to allow that expenditure either to be capitalised over an equivalent depreciation period or if the intangible asset is written off to be written off at that point in time.I would just like to note that research and development expenditure sometimes results in success and sometimes not. That is part of the normal rules of research and development. These rules seek to balance those interests to ensure our entrepreneurs continue to want to invest in New Zealand and in developing new products and services. I hear some Opposition members claiming: “This is not fair. This is not appropriate.” The reality is that these shareholders assume substantial risk and provide significant cash to finance these research and development activities and it is only appropriate that we do what we can as a Government to support such activities. In fact those who have read the book Get Off the Grass by Professor Paul Callaghan and Shaun Hendy were unequivocal in recommending that the Government continue to foster investment in research and development. There is a symbiotic relationship between the private sector and the public sector when it comes to research and development.We as a Government have an overwhelming need to continue to invest in public-good research and development because out of that comes many ideas that have commercial application. As a country we must continue to invest in adding value to our important industries as well as creating new industries as this is how we are going to create new jobs—higher-paying jobs that all New Zealanders desire and deserve.The third thing I want to turn my mind to is the child support reforms. This Government is focused on reducing the size and growth of child support debt. Along with the changes in this bill the reforms should ensure greater compliance and a reduction in the $3.2 billion of outstanding child support debt. The bill clarifies some of the debt write-off provisions. It inserts a wider definition around adjusted net income to take into account income from trusts and companies. It also allows for the ability to offset current payments against past debts and it introduces discretion to recognise other payments such as the payment of school fees as qualifying child support payments. In essence this is about looking after the interests of the child and making sure that both partners pay their fair share towards the upbringing of their children. This is essentially an issue of equity.Changes in respect of controlled foreign companies and foreign investment funds are also very important as they really set about reducing some of the deductions available to people calculating income from controlled foreign companies where they involve prepayments. This is consistent with the current treatment for New Zealand resident companies. The bill also makes some changes around the grouping of foreign controlled company rules. These changes are good business. They protect children. They encourage investment in research and development and they tighten up the rules relating to foreign controlled companies. I commend this bill to the House.