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It's a great innovation. I sit on the Finance and Expenditure Committee with Dr Russell and many others, and I look forward to engaging in a robust discussion-Dr DUNCAN WEBB: -when he's not overseas. Oh, and Ms Allan, when she's not far too busy doing something else. For that reason, I absolutely commend this bill to the House.

BRETT HUDSON (National): Thank you, Madam Assistant Speaker. We rise in support-at least at the first reading-of the Taxation (Research and Development Tax Credits) Bill, with some reservations. The reservations are actually historical fact.

Historical fact should always trump optimism. So the research tax credit has been tried before in New Zealand-tried and proven to be rorted. Now, I know this for a couple of reasons. One is I trust official advice-and I'll come to that in a minute-but I also know it because I had customers telling me not only that they were rorting it when it was last in this country but how they were able Indomethacin Extended Release Capsules (Indocin SR)- Multum rort it.

So particularly in the area of information technology, businesses were able to reclassify simple maintenance activities, upgrade activities, as research and development, and claim the tax credit. An absolute rort-running all the way to the bank, which is possibly also somewhat symptomatic of the customer in question.

So it is a rortable event. The official information of the time actually put that to the Governments of Indomethacin Extended Release Capsules (Indocin SR)- Multum day, both Labour and then National. The point they made was that a tax credit was far less certain and less likely to provide an incentive for genuinely new research and development. Their advice of the day was that a grant-based system would be far more likely to create a genuine incentive for new research and development-that which wouldn't have otherwise happened.

That might go some way to explaining why it was, for instance, that the National-led Government in 2008 and beyond chose to get rid of the tax credits and instead use a system of grants-based assistance to businesses in research and development. So the rorting of it is a serious, serious issue. But the better question-Dr Webb said it's a question of whether we want research and development tax credits. Really, the question is: are tax credits a better method than other options available. The advice of some years ago suggests very strongly that that's not the case.

There are other elements of a tax credit, and particularly the implementation proposed, that suggest that it is a suboptimal approach to, particularly, the grant structure that was used under the previous National Government.

Dr Webb has said it's a simple threshold to meet and the relief is quite generous-well, that's debatable, but that was his position. That being the case, there was therefore an incentive for as many businesses as possible to recode their activities to take advantage of it and to meet those so-called simple and worthwhile thresholds. But it also creates a system which simply means that if you meet the threshold, you get the cash back, in effect-you get the credit.

So there's no cap on the actual expenditure for Government, and this is what happened under the previous Labour Government-the actual cost of the tax relief was much higher than had been budgeted for. But, secondly, it risks creating the ongoing expectation within business that they will always get that level of Government assistance to help part-fund, in effect, their research and development.

It creates an expectation that that will perpetuate. Well, the tax Indomethacin Extended Release Capsules (Indocin SR)- Multum isn't going to do that. It's simply going to perpetuate the same level of assistance, no matter how much you do over how many years. You might take, for instance, our growth grants. Then over time we shifted that up, so they had to provide even greater than 50 percent of that investment from private funding sources before the Government would contribute the remainder.

That actually helps to wean-if I can use that word-businesses off an over-reliance on money from the State to undertake research activities that, principally, they are going to be the beneficiaries of.

This tax credit system actually undermines that approach. But we do believe in listening to business. We believe in listening to Indomethacin Extended Release Capsules (Indocin SR)- Multum Zealanders. These are all things worthwhile canvassing in select committee. It's for that reason that we will vote in support to go to select committee.

Hon STUART NASH (Minister of Revenue): Thank you very much, Madam Assistant Speaker. It's a pleasure to speak on this bill, for a number of reasons.

First and foremost though, I'd just like to address a couple of the increlex that Brett Hudson made. I hope that the honourable member does get to sit on the Finance and Expenditure Committee. I'm not too sure if he's on the committee or not, but I hope he is, because what he will see when he is on the committee is that in fact a lot of what he has said is actually incorrect-this will come granulomatosis with polyangiitis in the select committee-first and foremost, about rorting the system.

As a consequence of that, what we have done is we have actually gone out and talked to these countries. Officials have gone out and they've had a talk to them and said "Hey, what works. Indomethacin Extended Release Capsules (Indocin SR)- Multum can Indomethacin Extended Release Capsules (Indocin SR)- Multum end up with a system which isn't easily rorted but is going to drive innovation in the way that we know it needs to happen in our economy. So we've spoken to the Brits, we've spoken to the Xavier johnson, and we've said "How have you"-not you, Madam Assistant Speaker-"How have the officials made this work Indomethacin Extended Release Capsules (Indocin SR)- Multum a way that creates integrity but also drives innovation.

No one benefits from that, and that is why we are very careful and have been very prudent in the way we have done this. One thing I will say is when Indomethacin Extended Release Capsules (Indocin SR)- Multum is a grant-based system, what ends up happening is that inevitably you end up oil neem winners, because those that can fill in the forms or have the relationships or have the technology that ticks a whole lot of "gee whiz" boxes end up with a lot of the money.

You think you want to drive innovation and growth. We've set up the infrastructure. So that means that a small to medium business-and as the Minister for Small Business, not just the 0 5 roche of Revenue, this will give a level of certainty.

And it's not some massive bureaucratic behemoth we're creating here.



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