What are our political parties promising tech startups?

The state of New Zealand’s economy and the cost of living crisis has been at the centre of 2023’s election. As each party debates ways to build an economy that works for all New Zealanders, create more high-paying jobs and alleviate the housing crisis, the role of technology has been more-or-less absent from mainstream discussions.

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Technology has become New Zealand’s second biggest export, according to TIN data. Backing Zealand’s startups has the potential to boost high-skilled, high-paid jobs, increase consumer spending, and attract foreign investment – things that could stabilise the economy. And yet, there is still almost no national conversation in New Zealand about how to promote this sector, how to use technology to become a more productive nation, or how to advance current industries using technology, including a national strategy for AI which tech leaders have been calling for.

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Last month, Caffeine dug into the question of whether New Zealand can become a startup nation, one that transforms from a primary industries-based economy to a skills-based economy. This was off the back of a report from the Startup Advisors Council that detailed a range of policy suggestions to support startups. Now, with the election looming, we’ve looked at which parties, if any, plan to implement some of those policy suggestions, or have other plans of their own.

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How are New Zealand’s political parties planning to support the country’s technology sector?

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National wants to boost the science and tech sectors

“If we look at why our primary industries are so good at what they do, it’s because of the generations of commitment to using science and technology to keep improving,” Judith Collins, National’s spokesperson for Science, Innovation and Technology. “We have an ecosystem around science and technology that we need to completely ramp up so we can go from being a startup nation to a scaled up nation, because we’re simply not achieving the commercialisation that we need to be getting.”

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National was the only party to release a policy specifically geared towards boosting the tech sector. The policy mainly focuses on introducing new immigration visas to attract highly talented people with skills and expertise Kiwi startups need to grow. National also hopes to review the current rules around employee share options programmes (ESOPs), and establish a Minister of Technology to bridge the gap between the public and private sectors.

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If elected, National said it would introduce an International Graduates’ Visa, a Global Growth Tech Visa and a Digital Nomad Visa.

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International Graduates’ Visa

• Three-year open work visa.
• Available to people who graduated from one of top 100 universities in the world.
• Initially capped at 500 visas in the first year, but would grow after that.

Global Growth Tech Visa

• Path to residency for people with highly specialised skills.
• Must have worked at top global tech company earning at least $400,000 per year.
• Capped at 250 visas in the first year.

Digital Nomad Visa

• 12-month visa for those who want to work remotely from New Zealand.
• Option of applying for work or residence visa later.
• Capped at 250 visas in the first year.

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Dr. Eric Crampton, chief economist at think tank The New Zealand Initiative, says that the international graduates’ visa was a good idea, but that it might put off the types of people National would want to attract.

“Remember that National would maintain Labour’s ban on buying houses for those who are not on a residence class visa, unless they could afford to purchase (and pay a hefty new tax on) houses costing more than $2 million,” says Crampton. “Would you move with your family, to the far end of the world to start a business or take a high-skilled job, if you weren’t able to buy a house and couldn’t tell whether there would be a reasonable path to residence at the end of that visa period?”

Startup founders typically give options to employees to offset lower market rates for salaries. Under current tax rules, employees are being taxed at the time they convert an option into a share, rather than when the share is actually sold. That means employees need to pay upfront and out of pocket to make the most of their share options. The upshot? Highly skilled employees are disincentivised from taking jobs in the startup sector.

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National said it would “investigate changes to tax rules that would better support startups to attract talent by offering future equity in the business.”

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When asked why National was only promising to “investigate” the matter, rather than committing to a policy that would either shift the taxable event timeline or remove tax on startup ESOPs, Collins says the issue is nuanced and the party wants to “get it right.”

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But the refusal of both major parties to introduce a capital gains tax - and in particular National’s policy of reducing the bright-line test – almost encourages more investment in housing, which is essentially a non-productive asset, says Nick Robertson, senior consultant at economic think tank BERL. “Why aren’t we incentivising New Zealanders to invest in tech businesses?”

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National wants to establish a Minister of Technology who will act as a champion of the sector within government, acting as a bridge between the private and public sectors to enable scale and growth. They would also work with industry leaders and organisations to boost productivity and commercialisation, support R&D and ensure emerging tech like AI are being used safely and ethically.

National has also promoted a policy on ending the effective ban on gene editing and gene modification and streamlining approvals for trials and use of non-GE/GM biotech. The party hasn’t committed to investing in biotech startups but presumably without regulatory barriers, certain companies may be allowed to flourish in New Zealand.

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Labour plan for specific tech sectors

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While the Labour Party doesn’t have a specific plan to boost the tech sector, its manifesto details policies and investments into New Zealand’s technology-focussed future. Whereas National’s policy is more sweeping, Labour takes a sector-specific approach.

Aligned with New Zealand’s goal to reach net zero carbon emissions by 2050, Labour also hopes to boost renewable energy generation, specifically hydrogen, which could have ripple effects in the startup community.

“We’ve got the space sector, we’ve got agritech, we’ve got biotech – we’ve got some really niche tech in New Zealand,” says Hema Sridhar, strategic advisor on technological futures at thinktank Koi Tū: The Centre for Informed Futures. “What do those sectors need in order for them to thrive? It’s not going to be the same for agritech as it is for space, but it’s about figuring out what are those niches? What can the government invest in to unlock even more potential in that space?”

Sridhar notes that the sector-specific approach is akin to picking the low-hanging fruit – It will undoubtedly deliver results and move certain industries along, but that approach needs to happen in tandem with a broader strategy.

“In the lead up to an election, a lot of people are focused on the quick wins, but those will support the tech sector today. What will our tech sector in the next 10 or 20 years need? And how do we invest in that?”

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Labour’s goal is to help the agritech sector grow to $8 billion by 2030, up from its current estimate of $2 to $3 billion. This would involve:

• Injecting $100 million into the Venture Capital Fund to invest in agritech businesses.
• Investing $29.9 million into the Horticulture Technology Catalyst to help growers adopt automation and other innovative tech.
• Accelerate research, development and commercialisation of tools and technology to reduce agricultural emissions.
• Lean on New Zealand’s counter seasonal position to the Northern Hemisphere to be a “test-bed” for agritech development.

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Labour’s Climate agenda details how it would increase renewable energy in New Zealand and become a world leader in hydrogen production.

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One of the main vehicles towards supporting this sector would be through NZ Green Investment Finance (NZGIF), the Crown-owned green investment bank that Labour established in its first term. The fund’s goal is to accelerate investment in companies and technology that reduce greenhouse gas emissions, in part by attracting private sector capital. In its Climate Manifesto, Labour pledges to support the growth of NZGIF by investing a further $300 million, bringing its total commitment to $1 billion.

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Labour also said it would establish a Centre for Excellence for Renewable Energy that will work with the industry and the country’s education and training sector to train the energy workers of the future.

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The party is also committed to continuing its R&D tax incentive that gives eligible businesses a credit rate of 15%.

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Labour says it would back the Centre of Digital Excellence unit in Dunedin to support the drive towards a $1 billion interactive media industry. One way it is doing that is through the $160 million earmarked in the 2023 Budget towards a 20% rebate for video game developers.

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Labour’s policy also details plans to fund new fellowships for future science leaders. The party promises to invest in research hubs to bring scientists together on issues like technology and innovation, with a focus on advanced manufacturing and materials, energy futures and biotechnology.

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The Greens – sustainable tech only

The Green Party isn’t usually one to discuss ways to boost the economy by investing in tech startups. In fact, the party’s Tiriti-based economic strategy hopes to eliminate the dependence of economic systems on growth.

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However, we’re in an age where economic growth and green technology are not mutually exclusive. In fact, climate-related technologies are on the rise across the world, and a range of Greens-approved technology and business models are now in vogue.

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While the Greens don’t allocate any financial incentives to startups doing the Earth’s work, some of their policies could potentially serve to help boost greentech and even more climate-friendly modes of business. Such as:

• Identify new business opportunities in sustainability sectors and practices.
• End subsidies from high greenhouse-gas emitting industries and divert those funds towards the mitigation of climate change.
• Promote public and private investment in emissions reduction tech and in tech that underpins Aotearoa’s “national and community adaptation plans.”
• Reinvest any emission-related revenues from the agricultural sector to support its transition.
• Encourage circular business relationships.

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‍ACT says it support startups

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ACT tells Caffeine it “supports the startup tech sector.”

“There is an important role in selling the tech startup sector to the NZ public and especially students, and to sell the amazing success of New Zealand companies like TradeMe and Xero as exemplars of New Zealand tech industry success,” says Paul Goldstone, director of policy and research at ACT Caucus Support Centre.

One of ACT’s policies involves removing the barriers to access of overseas capital and investment. The party says that today’s law restricts foreign direct investment in New Zealand. ACT put forth the Overseas Investment (Except Investment from OECD Countries) Amendment Bill, which aims to make it easier for investors from OECD countries to invest in NZ while fostering stronger trade links.

ACT has also outlined an immigration policy that it says will remove restrictions for skilled technology workers. The party proposes a demand-based pricing system wherein employers pay a flat fee at the point of sponsoring a migrant.

The party also hopes to make changes to the Employment Relations Act to allow for independent contractors, which could make it easier to hire digital nomads and other non-residents.

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