December 4, 2016

SR&ED Needs Help: CATA’s Call for the overhaul of the system of tax incentives for Innovation and an Independent Authority to manage the delivery of tax incentives

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CATAAlliance

Since the release of the CATA SR&ED Action Plan, “Major Improvements in Canada’s System of Federal Tax Support for Business Innovation”, September 27, 2016, we’ve tested support for it through online polling and discussions with interested parties.  We have shared our work with other associations to promote a dialogue on the need and opportunity for improvement: https://drive.google.com/file/d/0B__wzrAC_E12R0Z3SkRDT2VxMXk2c2d3bnJWdXFzbVk1cTlF/view.  

We’ve just released an analysis of the publicly available statistics on the SR&ED program. They very much reflect the CRA’s re-orientation by the previous Government towards compliance and Budget reduction.  Aggregate “tax assistance” (i.e., tax credits) delivered by the CRA through the SR&ED program has gone down by $4.2 billion in six years from 2009-2010 to 2014-2015.  This does not include the legislated reduction in the SR&ED incentives announced in the 2012 Budget of $500 million a year.  The amount of “tax assistance” provided per claimant dropped from $227,778 in 2009-2010 to $156,522 in 2012-2013. 

Please send an email request with your contact details to CATA CEO, John Reid (jreid@cata.ca)  for a pdf copy of our analysis and related briefing materials.

The vast majority of the feedback we’re receiving supports the importance of Tax based incentives to both small and medium businesses (SMEs) and larger corporations.  But the current SR&ED program is seen to need much improvement.  In its current form, numerous executives experienced with the refundable tax credits are telling us in very clear terms that the program is simply too much of a hassle and too unreliable to be considered as an incentive by their firms. Some question what it supports.  Eighty-five to 90% of the respondents to our polling strongly support the creation of a new Independent Authority to manage and evaluate Canada’s tax based support for innovation.  This would include having responsibility for SR&ED moved to the new authority.  The commentary argues strongly that simply refining the current SR&ED administrative system will not be enough.  In spite of calls for improvement by CATA and others, including the call by Canadian Manufacturers & Exporters (CME) for a Senate review of SR&ED, the CRA is saying that they are not hearing of a review at this time.  In the fall, a Finance official indicated to us that there is always noise around SR&ED.  

The UK has shown what can be achieved with tax credits like ours.  There is no reason that we cannot do it – other than willingness.  For a comparison of the administration of the SR&ED tax credit program to the UK R&D tax credit program, prepared by RDP Associates Inc., please see:  http://cata.ca/files/PDF/CDA_UK_R_D_Tax_Credits.pdf.

What can you do to help open the Government’s mind to the huge advantages of improvements?

actnownowWe encourage you to contact your local Federal MPs, the key Ministers with responsibility for developing CANADA’s new Innovation Agenda, and the Minister of Finance to share with them the comments you have sent to us:  http://news.gc.ca/web/article-en.do?nid=1089419.

Why act now?  There is concern that the leaders of the Government’s Federal Innovation Review are too focused on direct funding programs, not realizing that they cannot get it right and make CANADA an Innovation leader, unless they get Canada’s tax incentives right.  

If you believe that the Government’s promised revamp of its Innovation support systems cannot succeed without the overhaul of SR&ED, please help.  If appropriate, please copy CATA:  roberts-bishop@sympatico.ca

MPs
http://www.parl.gc.ca/Parliamentarians/en/members?currentOnly=true&province=AB;
and
http://www.parl.gc.ca/Parliamentarians/en/members/addresses

Key Ministers, including the Minister of Finance
http://www.parl.gc.ca/parliamentarians/en/ministries

  • Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development
  • Honourable Kirsty Duncan, Minister of Science
  • Honourable Bill Morneau, Minister of Finance.

Coming Update on Feedback

Finally, we have received some very useful comments and suggestions about the other proposals outlined in the Action Plan on September 27th.   We will be issuing a short update in the near future.  Right now, we think that it is important to get across the message that a new administrator is needed if this Government is to achieve its goals.     

About CATAAlliance

Interact with your Innovation Peer Group Now http://www.linkedin.com/groups/Canadian-Advanced-Technology-Alliance-CATA-37239/about

The Canadian Advanced Technology Alliance (CATAAlliance) is Canada’s One Voice for Innovation Lobby Group, crowdsourcing ideas and guidance from thousands of opt in members in moderated social networks in Canada and key global markets. (No Tech Firm Left Behind) Contact: CATA CEO, John Reid at jreid@cata.ca