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Public versus Private: the future of R&D in NZ

Paul Brislen, Editor. 21 May 2018, 7:20 am

The Budget announcement of a spending boost for research and development, to the tune of a billion dollars, was welcome news for those watching New Zealand slip down the OECD rankings.

While New Zealand public spending in the sector has been on par with the OECD average, the private sector simply hasn't been pulling its weight and that, in large part, is down to the way R&D is treated for tax purposes both locally and internationally.

Tax breaks of 12.5% for businesses spending more than $100,000 on R&D will be introduced from April next year to encourage businesses to invest in research, but it's a move that comes at a cost. The Callaghan Innovation Growth Grant fund, set up to drive the sector along, will cease to take on board new applications, bringing the $657 million fund to a close.

Other grant schemes operated by the agency will continue, but these tend to offer top-up funds or funding for individuals for study purposes rather than the large-scale funding that the Growth Grant fund covered.

Many companies have  shied away from applying for government grants because of the sheer volume of compliance requirements needed, so for those companies this change will allow them to more directly invest in their own R&D and claim back spending as they incur it.

But for some, the Callaghan Innovation fund has provided a boon that has helped drive their development and commercialisation and which has lead to a number being sold to international players - albeit without any suggestion that the loans and grants would be repaid.

Callaghan has courted controversy during its tenure, however, with the decision to lay a complaint with the Serious Fraud Office over one of its grants and the inclusion of a contract clause requiring applicants not bring the organisation into disrepute, and quite what the organisation will become after April's changeover is yet to be determined, in public at least.

Ultimately, the proof will lie in New Zealand's ranking in the OECD and whether this move will mean we claw our way back to merely being average instead of underperforming.


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