tax credits lead to tax avoidance

Stuff reports:

Companies will get a slice of their research and development spending back under the new Government. 

Science, Research and Innovation Minister Megan Woods confirmed the Labour, NZ First and Green Government would be reintroducing research and development tax credits. …

One week before the election, the former Science and Innovation Minister Paul Goldsmith said tax credits were not in National’s plans because they were difficult to budget for.

“The problem with tax rebates is that it does complicate the whole tax system and it is very difficult to find out exactly what it is costing you.”

Goldsmith said accountants could easily write-off business spending as R&D when it was not, meaning companies would get away with paying less tax.

“Accountants are usually pretty innovative themselves … What you see is a reduction in the company tax over time and that grows and grows.”

The Government says it wants less corporate tax avoidance but this policy will see far more companies avoid tax. As Paul Goldsmith said, a lot of expenditure can be classified as research and development once you learn you effectively get given money by the Government if you do so.