Would-be investor puts on tax break pressure

New Zealand will miss out on 'thousands' of IT jobs if it does not offer sufficient tax breaks for R&D, claims a US-based businessman planning a technology park in Queenstown.

New Zealand will miss out on “thousands” of IT jobs if it does not offer sufficient tax breaks for R&D, claims a US-based businessman planning a technology park in Queenstown.

New Zealand-born Jason Neal, chief executive of hotel management software company GHS Global, wants to build the park and a development facility in his home town, which he claims could create up to 700 jobs.

But he says both projects may instead be based in Australia, where the government is offering tax breaks on R&D of up to 175%.

“We can bring more money to New Zealand than the government will know what to do with. I have other contacts that would be interested in coming to New Zealand but instead they are going to Australia. The New Zealand government could be missing out on billions of dollars and thousands of jobs,” says Neal.

Earlier this month, Neal contacted Computerworld requesting details of New Zealand salaries for a range of IT skills for comparison with rates in Australia. “The more cost-effective New Zealand is, the greater chance of basing our projects there,” he says.

Neal, whose San Franciso company produces hosted applications for the hotel industry, first announced his plans in October. He has since visited Industry New Zealand and met National and Labour Party figures. Next month, he will meet government officials in Wellington. Investment New Zealand, an arm of TradeNZ, is also talking to the company.

But while a “comprehensive review” of taxation is under way, with a report due this year, the government says it cannot offer immediate tax relief. “GHS will be subject to the same taxation regime as any other business in New Zealand,” says a spokesman for deputy prime minister Jim Anderton, who overseas Industry New Zealand.

But Industry New Zealand and/or Trade New Zealand, the spokesman says, can help with immigration, visitation support for potential partners, introduction for other partners and other support under various business development programmes.

Neal says his call for R&D support is not just for his plans but all business. He points to Ireland where such incentives are widely credited with being the backbone of its IT-based recovery.

This year, Australia announced a $A3 billion ($NZ3.7 billion) package doubling grants for private sector R&D, creating “word-class centres of excellence” in IT and biotechnology, and topped the existing 125% tax deduction for R&D with a 175% rate for the labour costs of extra research spending.

In contrast, the last New Zealand budget boosted R&D spending by 10% to $474 million, created a “seed capital fund” for IT firms and announced a $12 million grants programme.

A Bell Gully report last month said New Zealand firms are failing to respond to this, causing a rethink within government.

Neal left for the US 14 years ago to seek funding to develop GHS Global, which he created in Queenstown. He works in commercial property and investment and has planned his Queenstown projects for three years, claiming various land options for the 10ha site needed.

The first part of the project would involve 50 engineers working on an ASP application for the hotel industry. It would use WAP technology and applications for the consumer sector. The technology park/incubator would incubate up to 15 internet software companies.

The funding of $US100 million to $US150 million would come from a US-based planned venture capital fund, private investors and a potential global IT partner.

Neal expects to make a decision on siting the planned 8100 square metre development facility next month, and on the park within three months.

“I want nothing from the government [in grants]. All I want from it is a competitive tax policy. We have to look after our investors’ interests,” he says.

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