IT industry figures agree with the government's ICT Taskforce call for changes to the tax system.
A draft report from the taskforce, which was established in May, says if the country is to meet a 10-year goal of having 100 IT firms with annual turnover of $100 million each a year, government policies will have to be changed.
The draft report, Breaking the Barriers, says current tax rules place the country at a disadvantage to others and prevent New Zealand from attracting skilled workers and investment capital. More has to be done to make New Zealand attractive for investors, argues taskforce leader Murray McNae, and ICT product development costs should be made tax-deductable, the report suggests.
The Information Technology Association of New Zealand (ITANZ) says the taskforce goal of ICT increasing its contribution to the economy from 4.2% of GDP to 10% by 2012 is achievable provided tertiary and research institutions commit the country to reaching it.
ITANZ executive director Jim O'Neill says the taskforce "said things that needed to be said".
"We can't have our best technologies developed in other markets simply because, from a finance point of view, it's an advantage to do so," he says.
O'Neill also raises the skills issue. The taskforce says without sufficient skilled labour the ICT sector will be restricted to 6% of GDP.
ITANZ believes the education sector must produce more graduates with degrees and other ICT qualifications.
O'Neill says the country "needs the fuel to run the fire", which means encouraging younger people into IT by showing them it offers a rewarding career.
Immigrants would always be needed to fill certain specialist gaps, and the country had to be open to "the best people". But ITANZ believes changes announced this week emphasising better English language skills will have no effect on the ICT sector because IT immigrants tend to be highly-educated English speakers.
New Zealand Software Association head Rollo Gillespie says the taskforce report is "grounded in commercial reality".
The issue, Gillespie says, is how to create the large firms identified in the report when "finance and funding structures don't encourage this".
Andre Snoxall, director of information management and planning at Capital & Coast DHB and formerly of software company Doctor Global, is another advocate of tax incentives as a way to create prosperity.
Government, he says, should use tax policies to attract investment in R&D.
"There is no reason New Zealand should not compete. We have an even bigger market than Europe on our doorstep," he says.