The Business Herald's election analysis turns today to the critical issue of the knowledge economy.
If New Zealand is to earn a better living in the world, its people, companies and organisations have to improve their skills and knowledge. The need for knowledge is just as important to farmers and foresters as it is to software engineers and scientists.
Turning knowledge into economic activity, though, requires extensive research and development. Yet New Zealand's R&D track record is poor. We have one of the lowest rates of private sector R&D spending among developed countries.
In the election campaign, most parties have promised policies aimed at encouraging R&D spending.
But the business community is divided on how best to achieve that, judging by the latest New Zealand Herald-DigiPoll survey.
One-quarter of business respondents favoured the status quo. That allows companies to offset research spending against their tax bill. Currently, though, the IRD takes a hard line on what can be classed as a write-off.
Moreover, companies have to bear the full cost of money spent on developing, say, prototypes or new products by capitalising it on their balance sheets as an asset.
One-third of respondents favoured a full write-off of all R&D costs, as proposed by Labour. National has yet to announce its position. It is inclined towards a greater degree of write-offs but has called for more study of the issue.
About 23 per cent of respondents favour a taxpayer subsidy of R&D. Companies would, for example, be allowed to reduce their tax bill by writing off 150 per cent of their costs. The poll surveyed 320 business respondents with an error rate of 5.5 per cent.
Opinion divided on R&D
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