Tax Regulations Slowing High-Tech in New Zealand

December 15, 2011 New Zealand Taxation

Science daily #1
New Zealand’s tax laws and a lack of available capital are stifling growth in the biotechnology research sector.

On December 14th a new report was published by the Ministry of Science and Innovation, evaluating the current tax system and venture capital industry in relation to New Zealand’s biotechnology research sector. According to the report, the tax rules surrounding patent sales could be having a detrimental effect on the amount of high-tech research being carried out in New Zealand. The author’s of the report also found that there is a shortage of venture capital in the country.

Under current regulations, the sale of patents is taxed on its price, while the sale of other forms of intellectual property are treated as a capital gain. Peter Bradley, the chief executive of NZBIO and author of the report, says that the tax rules are a disincentive for young companies which are in the process of conducting research or applying for patents. He suggested that many new firms are likely to shift their research operations overseas in favor of overseas tax regulations.

According to the report, a lack of funding in New Zealand is still a significant detractor for research firms wishing to expand. There are currently adequate levels of start-up finance for new firms. However, there is virtually no capital available for mid level enterprises which are attempting to launch new products. The report called for the government to update the regulations for KiwiSaver funds, allowing them to invest in venture capital projects.
Photo by Sergei Golyshev