Budget provides $1 billion for Govt’s R&D tax incentive

The Coalition Government is delivering on its plan to support a stronger and more productive economy with higher wages by injecting $1 billion into business research and development (R&D), Research, Science and Innovation Minister Megan Woods and Revenue Minister Stuart Nash say in a Budget press statement.

New Zealand spends just 1.3 per cent of GDP on R&D, whereas the OECD average is 2.4 per cent, Dr Woods says.

“We need new ideas, innovation and new ways of looking at the world if our businesses are to build a more productive economy,” she says.

“That’s why this Government is putting $1.0 billion of operating expenditure over four years on the table to finance an R&D tax incentive, giving eligible businesses 12.5 cents back for every dollar they spend on R&D. This funding will be available to all businesses spending more than $100,000 a year on R&D.

“This system will help us transition away from the current Growth Grants model, which is available to a narrower range of firms. This represents a significant increase in the amount available to help smart Kiwi businesses to innovate.”

Mr Nash says the design of the R&D tax incentive is currently out for public consultation and productive conversations are being held with businesses around the country.

The billion-dollar boost for innovation would make the New Zealand economy stronger and more productive, he says.

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Let’s not forget science is one of the pillars of Labour’s primary industries approach

NZIAHS president Jill Stanley – going out to bat for agricultural and horticultural scientists on Radio Live at the weekend – reminded her interviewers and audience of something Labour’s Andrew Little told Federated Farmers almost a year ago.

Mr Little was Labour’s leader at the time and immediately after the introductory courtesies he told the feds:

The future of New Zealand’s primary industries can be summed up in two words — science and sustainability.

These are the twin pillars of Labour’s approach.

Last month Agriculture Minister Damien O’Connor announced 15 appointments to the Primary Sector Council, which has been charged with helping the primary sector to capture more value from its work.

The council will provide independent strategic advice to the Government on issues confronting the primary industries.

But where are the scientists?

Dr Stanley raised that question in a press statement (HERE).

She was asked to discuss her concerns with Radio Live’s Rural Exchange team (the interview can be heard HERE) at the weekend.

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For good measure, let’s lop Callaghan Innovation’s admin costs, Taxpayers’ Union says

The eradication of Callaghan Innovation’s controversial Growth Grants in favour of a rules-based R&D tax incentive is a major victory for taxpayers, the New Zealand Taxpayers’ Union.

Taxpayers’ Union Executive Director Jordan Williams for years has been campaigning against these handouts to businesses hand-picked by Callaghan Innovation.

“Governments shouldn’t be in the business of picking winners – it rewards businesses for political connections rather than productivity, and it’s unfair on the winners’ competitors,” Mr Williams says.

“Despite countless examples of businesses receiving grants and then going bust (or being bought out from overseas), the National Government refused to accept criticism of Callaghan grants. On this issue, the Honorable Doctor Megan Woods has shown far better business sense than her National Party counterparts.”

With the primary function of Callaghan Innovation being phased out, the Taxpayers’ Union is pressing for a downsizing of the Callaghan Innovation organisation, which employs 386 staff with an average salary of $112,000.

It believes taxpayers could be saved up to $86 million a year in administration costs.

“An across-the-board tax incentive is a far tidier and less risky solution than gambling taxpayer money on a handful of fat grants to select businesses,” Mr Williams said.

But an even better solution – he argues – would be to simply reduce the corporate tax rate. That would avoid any boundary issues and risks of gaming of the new R&D credit.

The Taxpayers Union will be submitting to MBIE on these issues. weeks.”

Source: Taxpayers’ Union

R&D funding’s contribution to innovation is examined

Two separate papers, launched by economic and public policy institute Motu and the New Zealand Productivity Commission, examine the links between research and development (R&D) spending and the creation of new products and services. They use data from Statistics New Zealand’s Longitudinal Business Database.

The Government spends millions of dollars annually on direct subsidies for research and development in New Zealand businesses.

Government support for R&D ranged from NZ$33 million to NZ$90 million per year during 2009–2013 in various forms, including training, advice and funding. There were two main types of R&D funding: project grants and capability building grants.

The first paper, “The impact of R&D subsidy on innovation: A study of New Zealand Firms,” found that receiving a government R&D grant almost doubles the probability that a business will introduce a major innovation, defined as a new product or service.

The second paper, “Measuring the innovative activity of New Zealand firms,” focused on innovation at the level of the firm. The authors found that despite more total money being spent on R&D, fewer business were introducing new products and services.

The Science Media Centre collected expert commentary on the papers.

Shaun Hendy, Director of Te Punaha Matatini and Professor of Physics at the University of Auckland, comments:

“When Steven Joyce and Sam Morgan duked it out on Twitter last year over whether taxpayers get their money’s worth from R&D grants to businesses, there was surprisingly little evidence available to call it either way.

“Now, Adam Jaffe and Trinh Le at Motu Economic and Public Policy Research have found evidence that the New Zealand government’s R&D grant schemes do, in fact, boost innovation. This is important because any government scheme that can boost innovation by business (in this case, by leading to new products or services) can generate spillovers that benefit the entire economy. This round goes to Joyce on points.

“However, a second paper by Le, co-authored with Simon Wakeman from the Productivity Commission, suggests that Joyce may need more than 140 characters for his next bout. The Minister has set himself the goal of lifting business R&D spending from just over 0.5% of GDP (around one third of the OECD average) to 1% by 2018. Yet Le and Wakeman show that business R&D spending is not always a good proxy for innovation, finding that many innovations do not stem from investments in traditional R&D. Policies that focus solely on R&D spending may actually miss opportunities for economic growth.”

Professor John Raine, Pro Vice Chancellor of Research and Innovation, AUT University, comments:

“Over 27 years working in the area of technology commercialisation, I have observed that R&D grants can indeed increase the probability that a business will launch a new product or service.

“There is always room to improve the way in which such grants are allocated and that the due diligence on the product or service opportunity is robust and carried out early. Even with strong due diligence there will always be a significant percentage of prospects that don’t pay off. The trick is constantly improving the quality of the pre-funding processes with input from technology sector experts and the investment community to maximise the chances of downstream success.”

Advice in “Get off the grass” is welcomed – but the strengths of grass are championed, too

Massey University vice-chancellor Steve Maharey has joined the admirers of “Get off the Grass”, the recently published book by physicists Shaun Hendy and the late Paul Callaghan that offers advices on how New Zealand can become a prosperous nation. But he cavils with the authors, too.

Hendy and Callaghan argue that New Zealand should move away from its land- and sea-based industries and promote a high-tech future in which NZ prospers by becoming a high-wage, high-value, high-productivity economy.

But getting off the grass would be a mistake, Maharey contends. The primary sector and the science that underpins it have an important role to play in shaping a more prosperous future.

In a recent book review in The Listener, economist Tim Hazledine quibbles, too. “Get off the Grass” is a classy, spirited, intelligent book, he says. But its central claims are wrong.

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Govt announces R&D student grants to grow NZ’s future innovators

Nearly 300 future innovators will get the opportunity to work in some of New Zealand’s top commercial R&D facilities, thanks to new grants announced by Science and Innovation Minister Steven Joyce.

$3.5 million worth of R&D Student Grants have been allocated to successful R&D active businesses enabling them to employ students with science, technology, engineering, design, or marketing degrees.

Demand for both the postgraduate and undergraduate internships was high, with interest in the 2013 grants exceeding available places, Joyce said.

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Applications are called for Callaghan Innovation R&D Student Grants

Innovative New Zealand businesses are invited to apply for funding to hire students as part of the Government’s R&D Student Grants scheme.

The R&D Student Grants, which will be administered by Callaghan Innovation, are available this year to R&D-active New Zealand companies to employ up to 70 postgraduates and 200 undergraduate students from science, technology, engineering, design, or marketing degrees.

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