KEY POINTS:
Government plans to increase research and development by private companies through the introduction of a 15 per cent tax credit in April is proving slow to take off.
The R&D tax credit was announced in the May Budget and passed into law last week as part of the Taxation Bill.
Businesses welcomed the announcement as a move to bring New Zealand in line with other OECD countries in providing a tax break.
But six months on, it appears few new companies have decided to move into R&D and those who already do it aren't jumping to increase their levels.
Tony Barclay, chief financial officer of Fisher & Paykel Healthcare, one of the country's biggest R&D spenders, said it was looking into increasing its spend but had yet to make any decision.
"Given the business is growing at around 15 per cent per year our R&D spend will be going up anyway, but it's a little bit too early to tell whether we will actively increase it."
The company spends 6.6 per cent of its revenue on R&D and reckons the new tax credits could save it up to $3 million a year.
Sleepyhead joint managing director Craig Turner said tax credits were welcome but were unlikely to be a driver for his business to undertake more research and development.
"Our view is that it's always good to get tax relief but it won't be a driver."
Turner said the credits were a step in the right direction but the Government needed to do a lot more to "get the country moving" in terms of research and development.
Technology Investment Network chief Greg Shanahan, which provides support for growing technology businesses, said the tax credits were more likely to appeal to businesses that were already doing R&D as they would already have the staff and resources.
Inland Revenue Department programme director Ron Grindle said the IRD had approached about 30 businesses to talk about the tax credits since May and received a high degree of interest.
But, he said, it was still early days.
Yesterday the IRD released draft guidelines for businesses wanting to apply for the tax credits. Those interested have until February 8 to give feedback on them.
R & D bonus
* Businesses will be able to apply for a 15 per cent research and development tax credit from April by filing it online with the IRD with their income tax return and supporting details about the application.
* The application will have to meet certain criteria to be eligible, including passing three tests relating to the business itself, the activity and the amount spent on R&D.
* The business must operate in New Zealand and the R&D activities must be related to business activities.
* The spend must also generally be above $20,000.
