Thought Leader, Russ Roberts, CATA Sr. VP, provides the context for go-forward advocacy campaigns: New tools, attitudes required to assist Canada’s success in digital economy: Roberts available for consultations with members
May 3, 2014

A recent interview in Research Money (see below, 2/24/14) summarizes CATA’s Advocacy framework, as set out by our Sr. VP, Advocacy, Tax & Finance, Dr. Russ Roberts.

Additional background materials and industry guidance can be found at the fully moderated Tax & Finance Social Media site at: http://www.linkedin.com/groups/SR-ED-Tax-Finance-Group-3246301/about

As well, Dr. Roberts has developed a special Tax & Finance Advocacy & Best Practices Portal that can be accessed at: https://sites.google.com/a/cata.ca/taxfinance-portal/

Members should also note that we now provides online video for connecting members to experts for one-on-one advice: A new Yellow Pages for the 21st Century

New tools, attitudes required to assist Canada’s success in digital economy

CATAAlliance is looking beyond the federal Budget to the forthcoming revamped S&T Strategy for indications that the government is prepared to face challenges and seize opportunities stemming from the rapidly accelerating digital economy.

The Budget did not contain any innovation-related business measures or changes to the scientific research and experimental development (SR&ED) tax credit program. Nor did it reflect any change in thinking about how the government can sustainably support the growth of the tech sector, according to CATA’s senior VP tax and finance.

“I don’t think we expected a large amount from this Budget given the emphasis on deficit reduction. We’re looking forward to the new strategy, “says Dr. Russ Roberts. “The government has not caught up to the curve of the digital economy and the adaption of technology. There’s lots of creative innovation going on that needs to be encourage.”

The Budget’s announcement of an Open Date Institute to be delivered by the Canadian Digital Media Network is an example of the kinds of initiatives that need to be created to assist the sector. Roberts says enhancing the ability to interpret and utilize date is not only a government responsibility.

“This also has to happen in businesses themselves rather than just through institutes or the interface,” says Roberts. “The underlying technologies of the digital economy are now mature enough to be utilized effectively to create new businesses and achieve rapid adoption and adaption. Canada must create new businesses around these technologies that will take market niches away from others. That requires a whole range of company sizes and types.”

Roberts says the cuts made in SR&ED in the 2012 Budget –which takes effect this year- represent a “major change” that has shifted it out synch with where the program innovation needs to occur (R$ November 9/12). The changes to SR&ED take as much as $1 billion out of the program and limit its use through a narrowing interpretation of eligible claims that have hit software companies particularly hard.

“I have a bias towards the tax system and so does the digital economy sector. When you make such a shift to direct support, software and manufacturing have taken the biggest hit straight on.”

To address the imbalance caused by the changes to SR&ED, Roberts says the government needs to look seriously at the tax framework that innovation-intensive companies work within, as taxes have a major influence on investment thinking. One approach is the so-called innovation box, which has the backing of the CD Howe Institute and was support by the Jenkins Expert Panel in its Review of Federal Support to R&D report.

Using a combination of tax credits and tax rates, an innovation box provides companies with incentives to boost their rates of patenting and commercialization. Roberts says several countries including the UK are already employing patent or innovation boxes with varying degrees of success.

“It can’t be too complicated. If it’s done right it can expand sales and increase rewards. We say very strongly it should be looked at,” says Roberts. “You have to find a way to adjust the tax rates so there is a preference for investing in revenue streams that enhance innovation. Now that there are much better development platforms, the real art is figuring out how to use them effectively. The research is beyond the technology. 

Related Resources:

Influential industry consortium to fuel Canada's Digital Adoption: Join with us to advance common cause
http://www.cata.ca/Media_and_Events/Press_Releases/cata_pr04301401.html

Digital Canada 150 will boost digital adoption, jobs: ICTC, CATAAlliance, CIOCAN
http://www.cata.ca/Media_and_Events/Press_Releases/cata_pr04071402.html

The Digital Adoption Campaign for Canada now Launched: View Video Insights from Thought Leaders & Add Your Voice
http://www.cata.ca/Media_and_Events/Press_Releases/cata_pr10191301.html