Government 'needs to get real'

The government's new R&D grant schemes offer little prospect of return for the country and business urgently needs the ability to depreciate R&D costs via the tax system, says Brave New World boss Frank van der Velden.

The government's new R&D grant schemes offer little prospect of return for the country and business urgently needs the ability to depreciate R&D costs via the tax system, says Brave New World boss Frank van der Velden.

Van der Velden, who founded one of the country's first corporate web developers, WebMasters, and then sold it to Advantage Group, is busy building his second major internet venture, having formed Brave New World by merging the former WebMasters Ad Network with Dave Clark Design.

He takes issue with a keynote speech on the knowledge economy theme given by IT minister Paul Swain to the New Zealand Computer Society Conference, held in Wellington. Swain touted the government's schemes to target new research and development and said the government was "looking at other options to promote more investment in this key area", but van der Velden is unimpressed with progress so far.

"These discriminatory schemes appear to invest in marginal schemes, with huge transaction costs and generally little prospect of return for the country," he says.

"The fact is our investment in R&D is well below other countries. Like our trading competitors, some form of blanket depreciation regime could be applied via the tax system to see much needed resurgence in R&D spend. Brave New World, like many other local organisations, sees great incentives to carry out R&D activities in Australia."

Van der Velden also calls for a reality check on Swain's proposition that New Zealanders "are innovators, and have shown ability in the product development field".

The truth, says van der Velden, is "New Zealand has fallen behind every OECD country in this regard. Since the early 1990s, corporates have withdrawn further and further into their shells of conservatism and done very little other than cut costs, rather than employ growth strategies. New Zealand business, including banks, seem to have become increasingly risk-averse, whilst other countries are becoming risk-seekers."

Van der Velden acknowledges Swain's call for a partnership between business and government but says that "at present, businesses are feeling alienated with adding costs - including tax and more legislation burdens, via tax and employment law - plus through changes such as the privatisation of the accident insurance model. These are all against international trends."

He cites Singapore and Ireland as "excellent examples of how the government can form a legitimate partnership with business".

Finally, says van der Velden, the government needs to be hard-nosed about Telecom's complaints over the cost of its Kiwi Share obligations - including providing universal service to rural areas. "Telecom was sold on the basis that the local loop was to be financed by Telecom, regardless of location," he says. "This was factored into the original price of $4 billion paid by the shareholders at the time. The government should have taken stronger measures to ensure that this was the case."

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