OECD says tax breaks needed to encourage innovation

By ADAM GIFFORD

New Zealand has been urged to improve its tax treatment of venture capital and research and development to encourage innovation.

OECD deputy secretary general Sally Shelton-Colby told the Knowledge Wave conference in Auckland today that New Zealand's tax incentives for private sector R&D are the lowest in the OECD.

She said the OECD did not believe New Zealand needed major tax reform, but there were issues it should address.

It believed the mix should move more towards taxes on consumption rather than income, and that the increase in the top tax rate discouraged high achieving New Zealanders and potential migrants.

The OECD also had concerns on the impact of the new industrial relations framework on the economic climate, and whether outcomes in the health and education sectors merited the amount put in.

The OECD will be releasing a country report on New Zealand next year that focussed on those areas.

"New Zealand's performance re developing its human capital needs to be improved," Ms Shelton-Colby said. "Investing in human capital is critical for growth."

She said lifelong learning was as important as improvements, in preschool, primary, secondary or tertiary education.

The OECD has endorsed a model of "individual learning accounts", set up by corporations, governments or a collaboration of the two, where workers manage their accounts and decide how to spend them on their own training.

"We are inclined to think there needs to be a reorganisation of work," Ms Shelton-Colby said, adding workers needed to be given more of a voice in the process of change.

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