A review of New Zealand’s past & current R&D incentives and how they reflect Adam Smith’s (1776) principles of good taxation : an exploratory study.
Degree GrantorUniversity of Canterbury
Degree NameMaster of Commerce
The importance of Research and Development (“R&D”) in generating innovation is an often-discussed matter among scholars and politicians. The conclusions from academic literature on the matter seem to vary between studies and when addressing different types of R&D incentives. In New Zealand, there has been interest in using R&D incentives to increase R&D expenditure, which hypothetically leads to better economic growth, knowledge-spillovers and the gaining of a competitive advantage with markets overseas. The reason for the increased interest in R&D perhaps most dominantly stems from an Organisation for Economic Cooperation and Development (OECD) R&D survey. The survey shows that in comparison with other OECD countries of comparable size New Zealand‟s R&D spending is noticeably substandard, hence, the urging importance of discovering an effective way to alter business behaviour and increase R&D spending. This necessity to increase R&D spending invites the need for R&D incentives as well as increase the volume of experimental research conducted with the resolve of better understanding the collective effects involved in utilising different R&D policy tools to cultivate R&D expenditure. With the intention of adding to the sparse, non-quantitative R&D incentive discussion, this project provides a qualitative review of prior and current R&D incentives used in New Zealand. This project further evaluates the possible effectiveness of New Zealand‟s past and current R&D incentives in terms of equity, certainty, convenience and economy. This project utilises the case study approach and the qualitative documentary analysis method to perform an exploratory study that applies Adam Smith‟s (1776) Principles of Good Taxation as an evaluation framework to assess the effectiveness of the above-mentioned incentives. The tentative findings show effectiveness according to Adam Smith‟s framework in relative ranking being: the R&D Tax Credit and R&D Cash Out of losses incentives are tied in first place, followed by the new R&D Callaghan Innovation Grants in second place.