Research and development tax credits for business are a luxury that should be axed to fund personal tax cuts, National's finance spokesman Bill English said today.
As part of its wider economic policy released today, National announced that if elected it would drop the tax credits, saving $619 million up until 2011/2012.
National had originally planned to reduce the credit from 15 percent to 10 percent, but has decided the money would be better used to fund personal tax cuts.
Mr English said in his commentary on the party's fiscal policy the reduction had been planned because much of the money that will be paid out would have had little effect in the level of R&D.
"However, given the persistent operating deficits revealed in the Prefu, these tax credits have become a `nice-to-have' item that is simply not affordable any more," Mr English said.
Finance Minister Michael Cullen was scathing about cuts, saying the scheme was intended to foster innovation and boost economic growth.
Dr Cullen said that National had implied any savings from reducing the credit would be used in other research areas, but it now appeared it was going towards tax cuts.
Progressive leader and Cabinet minister Jim Anderton said the last thing that was needed was a large tax on innovation.
He estimated that the reduced benefit to businesses was far greater than the cost savings estimated by National.
