The Government's meeting with businesspeople in Auckland this week was the ice-breaker. The participants have all come away with a positive attitude and a wish to attend more such meetings. It is a start to constructive dialogue.
The Government, by all accounts, lived up to its promise to listen. It duly offered to clarify the tax treatment of industry research and development, noted another plea for reductions in the cost of compliance with taxation and regulation and, perhaps most important, it offered to ease the immigration barriers to skilled workers.
Those are all worthy projects, particularly the last. It is absurd that a nation with a shortage of information technologists is not only turning away applicants with those skills but is prepared to order them out of the country when a work permit expires.
It is high time that the offer or possession of a job was enough to ensure a welcome in New Zealand. But new immigration rules alone will not work economic magic. Nor will redefining the tax treatment of research and development. There is reason to suspect we might not be the laggard in R&D that we are supposed to be.
As the Government comes closer to full tax deductibility, accountants admit that companies have been deducting research and development costs anyway by designating them as ordinary expenses. That might explain the appalling level of private sector research and development recorded in this country compared with others. It also means that if the Government clarifies the rules, firms doing research and development may be worse off.
Strictly, they are supposed to treat the costs of developing a successful new product or process as capital investment, which cannot be deducted except as depreciation. If, on the other hand, the work does not result in a successful product or process, the costs can be written off as an expense. The rule is absurd and if the Government's "clarification" simply renders the rule harder to avoid, it will discourage the very sort of investment the country needs.
It is not evident that this point was raised at the forum and participants did not mention it afterwards. In fact, they said there had been "a shortage of specifics" and one business leader added: "I think the Government will develop those."
That, frankly, is precisely what business should not be saying. The R&D example shows why business leaders worthy of the name should not leave it to the Government to turn this exercise into tangible proposals. The forum's business representatives should now organise their own meeting to turn noble sentiments into finite targets. Unlike the Government, they should invite the established business organisations and cold-shouldered business leaders such as ASB Bank chief Ralph Norris to participate. Together, they could usefully agree on reasonable and measurable national goals for the economy - goals such as average 4 per cent GDP growth over the next few years, 3 per cent employment growth, goals for new export products and patents. Separately, they should set contributing growth goals for their own enterprises, particularly those in line with the export opportunities that our low dollar makes so compelling.
In leadership, actions speak louder than words. The Government's forum has generated the words. Now let's see the country's business leaders translate those into action then invite the Government to assist.
<i>Editorial:</i> Down to business after the forum
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