Biotech industry wants patent tax laws changed
Tax on patent sales may be pushing our advancements offshore.
Thursday, December 15 2011 || Science || BY Jazial Crossley, Businessday.co.nz
Between 2007 and 2009 the industry grew more than 20 per cent in New Zealand, ranking tenth place among the OECD countries for its high volume of biotechnology patents per capita.
But bioeconomy industry organisation NZBIO said the punitive tax system covering the sale of patents was encouraging their registration offshore.
Under New Zealand tax law, patents sold are taxed on the sale price compared to other forms of intellectual property such as trademarks where the income from the sale is treated as a capital gain.
NZBIO acting chief executive Peter Bradley said this provided a disincentive to early stage investment and was putting young companies off from staying in New Zealand.
"It's often a condition when you do a sale overseas that you move the intellectual property into an overseas entity now. If you've got to pay a whopping great amount of tax on the sale of that intellectual property then people are likely to go elsewhere.
It incentivises very young companies whose intellectual property is not highly developed or valued yet to go overseas potentially taking staff, jobs and assets with them," Bradley said.
"The bioscience industry would absolutely like to see it changed. I think it should be aligned with the tax on other intellectual property."
The industry here thrives by leveraging off the strong agriculture sector and working in human health research, plant and animal research, forestry and forensic and environmental sciences.
Many kiwi companies in the sector are industry leaders on a global scale such as cleantech business Lanzatech, which is developing a low carbon fuel for airline Virgin. This week Lanzatech was recognised internationally by being named Platt's Global Energy's "Sustainable Technology of the Year" and counted among the Red Herring Global 100 most innovative new technology companies.
Bradley said it was a credit to the quality of the science and the people behind bioscience companies that the OECD said New Zealand was ahead of the curve compared to other OECD countries, for its progress in industry and agrictulture related bioscience.
These areas are expected to have the most value in biotechnology by 2030.
"We are doing so well exceptionally with outstanding science and companies are based on that. That science goes across all sectors: medical, cleantech.
Having that basis of technology married with the New Zealand entrepreneurship would probably be what I'd put the success down to,'' Bradley said.
However a lack of cash remained a big problem for advancing many bioscience companies.
''New Zealand has never been a country that's been flush with venture capital funds and venture capital is the sort of capital you need,'' Bradley said.
''There is a big hole in the capital structure of New Zealand at the moment, when companies need to grow or expand their science to commercialise it.''
