Elections are taxing affairs

Why private sector R&D is as deserving as parents and students

A quick trawl through the Computerworldarchives archives shows we’ve asked about R&D tax breaks every election since around the time the computer was first invented, all to no avail. This year, however, it’s of more importance than ever, for two very good reasons.

First of all, New Zealand spending on R&D as a percentage of GDP is pretty weak. Certainly the Government is spending on R&D, and the entire alphabet soup of agencies is included in the handout: MORST, FORST, FIRST, VIF, NZTE, you name it, they’ve got a plan.

This, however, is not enough. Government can only spend public money so fast, despite all indicators to the contrary, and it’s up to the public sector to do its part in boosting New Zealand’s spend on IT R&D.

Which brings us to the second point — New Zealand is a mature market for IT, which means we can’t expect huge swags of growth in the local market. IT is slated as one of the Government’s key economic growth sectors — and other sectors also depend on IT to grow — yet our R&D spend in the private sector is tiny. IT needs to do more than its fair share of R&D so we can export our goods overseas.

The global market for IT services and products is expanding faster than it is locally. Countries like China and India are going to grow at a huge rate over the next decade and instead of exporting to them we’re going to be importing from them. They represent a fertile market which we won’t be able to take advantage of, unless our IT sector is as innovative as our competitors. We need to perform productive R&D to do that.

But are tax breaks the answer? The Govern­ment clearly thinks they’re not, saying it’s difficult to define what is and isn’t R&D and that companies should be doing this kind of thing anyway. The National party says all taxes should be reduced, not just R&D, and not just targeting the IT sector, as governments make lousy decisions when it comes to picking winners. I’m not sure that’s true, but I do think if we want to attract offshore investment in the R&D space we need to offer more than our competitors do, including Australia, Ireland, the US and the UK. Currently that’s not the case.

In the rush to offer working families with two mortgages, student loans and second jobs a chance to put their kids in day care so we can better pay for our retirement, I think something’s been lost along the way. I hope it’s not the potential economic growth a booming IT export industry would bring.

Brislen is a Computerworld reporter

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