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Blindly cutting away

Written By: - Date published: 2:08 pm, March 26th, 2009 - 23 comments
Categories: business, economy, national/act government - Tags: , , , ,

One of the most cavalier and foolish actions of the National led government during its first 100 day blitz of legislation (in itself described by many as an assault on democracy) was the cancellation of the R&D tax credit.

The business community warned well in advance that cutting the credit was a very bad idea, but National went ahead anyway, and the action created hardly a ripple in the media..

Well this morning a small business owner got a chance to speak up on this issue. Ian Taylor of ARL, a computing company based in Dunedin, was being interviewed on Morning Report. He described how hard it is to succeed, how the company nearly folded, and how they have just had a major success winning a large contract with the BBC (audio link). This is what he had to say about the government and the cancellation of the tax credit:

The real question we should be asking ourselves is why aren’t there more of these stories happening.

I can see already politicians jumping on this ’cause it looks like a great good news story, you know battling New Zealand company with great innovation, aren’t we really good.

But actually, what I’ve found, is that politicians talk the talk and just don’t walk the walk…

One of the things I found absolutely staggering, I mean the reason we win this, and other New Zealand companies in this technology win this sort of stuff is because of the amount of R&D – this is all about R&D. And yet, I think that it was Rodney Hide, just the arrogance of the man, to dismiss the R&D tax rebate on the basis that it would be a rort for people who did R&D…

Well you know Rodney, get a life. The future of this country is about small companies doing a lot of R&D.

So here we are, relying on small businesses to pull through and lift NZ out of recession, with a government desperately casting round to find a credible way of stimulating the economy, and what have they done? Ignored the advice of the business community and cut one of the few things that could actually have made a difference. It’s profoundly stupid. Thank goodness someone finally said something.

23 comments on “Blindly cutting away ”

  1. Rich 1

    What Rodney calls business, most people call fraud.

    (I see another ACT candidate has been busted. The way they’re going they’ll soon have a higher crime rate than the Mongrel Mob. Maybe yellow jackets will be caught be the patch ban?).

    • Felix 1.1

      Jesus. Here’s a quote from the article Rich linked to:

      He described online sexual chat with 12-year-olds as “fun and sexually exciting” but said his activities were “harmless” and the girls could “block” him from their computers if they wanted.

      See, it’s ALL ABOUT CHOICE.

      • Dean 1.1.1

        Dover Samuels.

        See, the problem is with you holier than thou lefties is that whatever brown stuff you want to fling, theres an ample suppy of it to throw back at you.

        It’s be funny if you weren’t so goddamn serious about it.

        • Felix

          Well it is a serious matter, Dean. Might even be a 3 strikes offense.

          What do you think about his assertion that the girls could block him from their computers if they wanted?

          I hope you’re not suggesting that he’s right and that young girls should have the choice to hang with pedos if they want to.

          I really hope you’re not defending this, Dean.

          • Dean

            “I really hope you’re not defending this, Dean.”

            Of course I’m not. I’d rather he was out of the gene pool altogether.

        • QoT

          Dover Samuels has been convicted of possessing child porn and tried to excuse it by saying his victims could choose not to engage with him?

          Must’ve been asleep that week.

  2. Greg 2

    What ever your views about R&D, a tax credit is an extremely bad way to promote it. Talk to a few business owners – they just redefine what they call R&D to gain the tax credit. Its an over all loss because of the extra admin required to make the adjustment. An R&D tax credit does not increase R&D (even though it will say so on paper), its just a straight subsidy to business for no gain.

  3. Felix 3

    Talk to a few business owners – they just redefine what they call R&D to gain the tax credit.

    Would they be time travellers?

  4. Dean 4

    And if you think that anywhere more than a tiny fraction of small business owners qualified for or took advantage of this credit then you’re truly deluding yourself.

    I realise that Labour abandoned its knowledge wave mentality after a few years in government, and that people’s memories are short – but to actually desperately believe that you’ve just made a point is utterly and totally stupid.

    As an excercise, perhaps you could tell everyone the percentages of small business that benefited from this so-called “tax credit”?

    I await with the most baited of breath.

    • Felix 4.1

      Approximately zero percent as it was cancelled by the National/Act govt before it even came into effect.

      That’s why it’s so funny to hear people like Greg, above, telling such blatant lies about how the credits were being misused and abused. Your first sentence is pretty funny in this light too.

      • Dean 4.1.1

        You may wish to see where I said “qualified for”.

        • Felix

          I also saw where you said “or took advantage of” and “benefited from”.

          But that’s ok – I’ve heard National and Act members in the house talk about it this way too and I know that they know they’re lying, but when guys like you repeat it, it’s probably just naivety.

      • infused 4.1.2

        Funny, you don’t mind applying the same logic to the so called “Fire at will bill”.

        • Felix

          The 90 day bill has been cancelled before it came into effect?

          Missed that, thanks for the update.

    • Stack2 4.2

      And it’s “bated breath”, not baited – although I must admit I don’t know what you’ve eaten lately.

  5. gingercrush 5

    I think National made some mistakes with the R&D credit and they certainly should do something to replace it. But Labour’s R&D credits had obvious problems. But National should have either fixed it or worked through something to replace it. And they haven’t done either. There must be some ability to make it all tax deductible at least.

  6. Matthew Pilott 6

    Well at least the Righties are being consistent here – people on the dole are bludgers and theiving off the rich, rorting the system, and now all businesspeople will rort a system (it wouldn’t be as easy as asserted here, but I think that’s just a lack of understanding of the policy) when given half a chance.

    I thought the Left were stereotypically meant to be the ones who thought that Business would exploit opportunities unscrupulously – maybe the Right only thinks so when the idea came from the Left.

    So they’ll rort R & D tax credits, but not the 90-day bill or being able to exchange a weeks’ leave for cash – hmm…what do the last two have in common?

  7. BLiP 7

    And then there’s the cancelling of the rural R & D scheme “Fast Forward”. National said it would do this before the election but was surreptitious afterwards because it knew the key players in the industry were less than impressed.

    What – with leaving small communities to fend for themselves in the provision of the fundamental necessity of water and pissing off the farmers as part of their open agenda (let alone the perils of the hidden one) is it possible, is there a glimmer, the merest skerrick of a snowball’s chance this National government could be one term wonder?

    Fuck, I hope so.

  8. r0b 8

    this National government could be one term wonder?

    Nahh “John Key is on record as saying he has no interest in leading a one-term government.” So there you have it.

    On topic – stuffing R&D initiatives seems very short sighted to me. The interview with Taylor is worth listening to – experience from someone in the front line.

  9. Observer 9

    I work for a LARGE company. Last year we were told to look for Anything that might Possibly be categorised as R&D in our every day routine work and document it so that the accountants could ‘test it’ against their interpretation of the government’s R&D initiative.

    Is that enough evidence that there was a BIG PROBABILITY that the major impact of the initiative would be to reduce government revenue without increasing the country’s competitive positioning.

  10. sean 10

    Matthew Pillott, do you ever not deal in strawman arguments? It is the lowest form of arguing – sharpen up.

    • Matthew Pilott 10.1

      It wasn’t one in the slightest, but you’ve invented some form of new low there yourself. Some form of cross between whining, having a whinge, and having a cry. Go enjoy the sun.

  11. r0b 11

    Last year we were told to look for Anything that might Possibly be categorised as R&D in our every day routine work and document it so that the accountants could ‘test it’ against their interpretation of the government’s R&D initiative.

    Do you disapprove of that? Do those same accountants look for ways to minimise tax payments and “test” them against their interpretation of the government’s tax laws? Anything wrong with that (in your opinion)?

    Is that enough evidence that there was a BIG PROBABILITY that the major impact of the initiative would be to reduce government revenue without increasing the country’s competitive positioning.

    No it ISN’T.

    First, as above, companies look for ways to maximise their profits within the law all the time, and nobody bats an eyelid, e.g. tax avoidance (not tax evasion).

    Second, your company was exploring its position, that doesn’t mean that an application for R&D credits would have been successful – if it was an obvious rort it should have been spotted and declined. If it was approved, then in the government’s view the activity qualified as R&D, and should have been supported.

    Third, of course you can’t design a perfect system, nobody expects that. The tax system gets rorted by some but we still have a tax system. The welfare system gets rorted by some but we still have a welfare system. Credit cards gets rorted by some but we still have credit cards, and so on. It’s a cost of doing business. Or for government, a cost of achieving its goals. If the government is serious about supporting local business, fostering innovation, a high tech economy and so on, it needs to be offering support. The R&D credits were such a form of support.

    I don’t know the real reason National cut the R&D credits. It seems to be an ideological burp. The argument that they had to go because some companies would abuse them is self evidently pathetic. National is either serious about supporting R&D based industry or it isn’t. Apparently it isn’t. Apparently a cycleway will be much better for our economy than supporting hundreds of innovative businesses. Hmmmm.

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