KEY POINTS:
A 15 per cent tax credit for research and development may help change the minds of companies considering taking their R&D activity overseas, says GPS technology firm Rakon.
Alternatively, it might give them the extra cash needed to ramp up their international presence - it depends on who you talk to.
Whatever their preference, listed R&D heavyweights responded eagerly to the Budget announcement making a generous rebate available on spending related to mainly locally based innovation.
Rakon chief financial officer Graham Leaming said the credit could help ensure R&D stayed here.
"I think it's positive in that it provides a little bit more incentive for organisations that might otherwise be thinking about moving an activity like that," he said.
Rakon, which spends about $20 million of its $106.2 million revenue on R&D, said this month it was planning to develop production capability in China but Leaming said that did not include its core R&D capability.
Rakon, which makes high-performance crystals and oscillators used in global positioning products, employs about 750 people worldwide, with about 500 employees at its Auckland head office.
With analysts projecting that NZX-listed Rakon's revenue will surge to $200 million in coming years, that means a tax credit of up to $6 million annually if R&D spend increases proportionately.
Leaming expected a good level of Rakon's R&D spending would qualify for the tax credit, given that it has 100 engineers employed here.
A large proportion of payroll costs of between $5 million and $6 million would be eligible for the credit, which included the costs of employee remuneration.
"A 15 per cent tax credit on some reasonable chunk of that is not insubstantial."
ABN Amro Craig analyst Brett Orsler said a $6 million tax credit was "not hugely significant" but positive.
"The Budget is not going to have a dramatic influence on the direction of their growth profile," he said.
"They could let that float through to the bottom line or can recoup it back into more R&D. I'd imagine they might do a bit of both."
In the case of Fisher & Paykel Healthcare, Forsyth Barr analyst Guy Hallwright said the credit could encourage the company to ramp up its R&D activities, worth about 6 per cent of its $289.5 million.
The Spend
Rakon
* Revenue: $106.2 million.
* Estimated R&D spend: 20 per cent.
* Estimated R&D tax credit: $3.2 million.
F&P Healthcare
* Revenue: $289.5 million.
* Estimated R&D spend: 6 per cent.
* Estimated R&D tax credit: $3 million.
