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Why Govt's "limited thinking" on start-up mini-tax credits is stifling innovation

Why Govt's "limited thinking" on start-up mini-tax credits is stifling innovation

"These half-baked tax credits come with some serious small print – when the business becomes profitable it has to pay them back."

Businesses trying to innovate and create better products are being let down by the Government with an industry expert saying Economic Development Minister Steven Joyce’s mini-tax credits will have almost no impact.

Under Government plans, emerging start-ups will be able to cash in tax owed on R&D in the form of a tax credit, in a bid to increase innovation spend across the country.

Start-ups would then repay the tax when they either became profitable or sold the business, with Joyce hoping to trigger a substantial rise in R&D spending.

As a result, the Government believes the move could equate to around $15 million of cashed out losses each year, across as many as 350 start-ups in New Zealand.

Yet according to Labour’s Finance spokesperson Grant Robertson, quoting a recent New Zealand Herald story, Andrew Dickeson, director of taxation services at Staples Rodway reports; "I think people will be slow to change their approach to R&D based on this."

“He’s exactly right," Robertson adds. "These half-baked tax credits come with some serious small print – when the business becomes profitable it has to pay them back.

"That’s not an incentive, it just encourages creative accounting."

According to Robertson, what's needed is a more "comprehensive approach" with across the board research and development tax credits.

"The piecemeal approach from National means the economy as a whole is missing out on crucial investment that will create high paying jobs," he adds.

“Businesses want an innovative partner in Government to support them. They won’t get it with Steven Joyce."

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