Won’t better taxes undermine innovation?

"It will damage the economy and destroy innovation"


The argument assumes that innovation is purely down to the efforts of individuals and businesses. However, Government has a major role to play in innovation both directly through its funding of research in our universities and Crown Research Institutes and incentivising research and development in the private sector. The countries often cited as innovation economies include Finland (tax take: 42% of GDP) and Sweden (43%). Both have capital gains taxes and Finland also has an inheritance tax.

Overall their tax takes are far higher than New Zealand’s 32%. Finland currently spends 2.94% of GDP on research and development and Sweden spends 3.53%, whereas New Zealand currently spends 1.49%. In other words these countries spend around double what we do and as high tax countries their economies are also more successful than ours with GDP rates that above the OECD average, while New Zealand’s is below the OECD average.