SR&ED Advocacy Campaign: Advance Notice to SR&ED Performers
April 25, 2006

CATAAlliance Memorandum

Date: April 25, 2006

Attn: all Canadian based SR&ED Performers

Re: SR&ED Advocacy Campaign

++ Action Requested: Advance Notice of SRED Campaign

CATAAlliance has been a leading advocate calling for improvements to Canada’s R&D tax credit system. Today, the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program provides more than 2.5 billion dollars in support of private sector innovation. This is matched by more than 15 billion dollars in complementary investments by the businesses that claim them.

On the face of it, this incentive program and these numbers look impressive. In fact, this program is in decline. The key thresholds defining which businesses can effectively use the program have not in any way been adjusted to reflect the rate of inflation over the two decades since the program’s inception. It is losing its competitive edge as an incentive for investments in the knowledge economy and, for that matter, as an incentive for the retention of existing investments in talent and projects.

Canada is rapidly moving away from being a highly attractive country in which to invest in R&D. As the Canadian dollar rises, engineers and scientists of the emerging less expensive economies of India, Korea and China are demonstrating what they can do.

The basic structural concepts and provisions of Canada’s tax credit system are becoming dated. At the same time, other countries are implementing their own incentives containing more progressive provisions to deal with issues that are perennially raised about Canada’s R&D incentive system. Encouragingly, the Conservative Party has recognized the importance of improving this program, committing that

A Conservative government will…Recognize the success of the Scientific Research and Experimental Development (SR&ED) tax credit in spurring private investment in research and development, and work with stakeholders in all fields of research and various industry sectors to explore expanding this tax credit.

In our continuing effort to promote needed improvements in this critical program, CATAAlliance is developing a white paper on the program to assist the government in understanding the importance of improvements and the priority that business gives to improvements. We are working with all SR & ED performers in Canada, in partnership with allied groups and associations. As part of this work, we are conducting a survey to help us better understand your priorities for change.

++ Action Requested

Please help us by completing the SR&ED Survey (email notification of the Survey aspect of the SR & ED Campaign will be sent by separate email). It will take only a few minutes.

This survey examines the importance of a number of commonly heard themes, including making the credits universally refundable, broadening the scope of product cycle that is promoted, broadening the scope of work allowed, e.g., work outside of Canada related to Canadian projects, and improved administrative practices.

As well, today, the administrative structure of the SR&ED Program appears to be slipping back to one in which the delivery of the program is increasingly decentralized from the direction of Head Office. This situation has led to administrative issues in the past. Your observations on how the program is functioning from a delivery perspective are thus also very important.

Yours sincerely,

John Reid, President
Russ Roberts, Senior Director
CATAAlliance

Ps Please visit our On-Line SR&ED Centre for additional guidance on the program.