SR&ED Tax Credit Campaign Update
June 21, 2006

SR&ED Tax Credit Campaign Update

Campaign Components:

  • Survey of community priorities (all SR&ED Performers, please complete at):
    http://www.e-penso.com/survey/s?s=CATASRED
  • Circulate to all colleagues with an interest in SR & ED Tax Credits
  • Consensus building through Town Hall meetings with CFO’s, tax leaders
  • Development of White Paper (see highlights below)
  • Presentation to Government officials and Finance re: Budget recommendations

The SR&ED tax credit program is the primary support mechanism for innovation in Canadian Businesses. The SR&ED tax credit incentives are strongly supported by all sectors of the business community as the right way to promote innovation. They are looked upon as a very important factor giving a key cost lever favoring investments in innovation in Canadian businesses.

Today’s SR&ED program was conceived over 2 decades ago and has only been tweaked since then. In an attempt to identify issues of importance to Canadian businesses, we have developed a survey to gather industry feedback on the effectiveness and efficiency of the current program. We are trying to determine which issues are important to whom and what changes are a priority for whom. The survey results will be used in the development of a white paper on the options for improving the program which will then be presented to the new Government with recommendations prior to the next budget. Survey coverage includes: Organizational attributes, scope of eligibility& refundability, SR&ED costs included as eligible expenditures, legislative and policy complexity, and administrative practice.

The survey has been available to all SR&ED Performers as of mid-May and will continue over the next several weeks. To date, we have gathered responses from about 200 industry leaders and encourage the participation of all SR&ED performers. If you or your colleagues have not already completed the survey we encourage you to do so by accessing the survey at the following link: http://www.e-penso.com/survey/s?s=CATASRED

Partnering associations that have shown an active interest in the survey and have promoted their members to participate in the survey include:

  • CCPA: Canada's Chemical Producers Association
  • CVMA: Canadian Vehicle Manufacturers' Association
  • FPAC: Forest Products Association of Canada
  • AIAC: Aerospace Industries Association of Canada
  • NAAA: North American Automotive Association
  • ADRIQ: Association de la Recherche Industrielle du Québec

Preliminary Summary of Results to date:

To date we have received a wide spectrum of industry sector participation, with the highest participating sectors being firms in the Information & communications technologies, advanced manufacturing technologies, aerospace and defence, and forest industries. So far, these industries have identified similar issues of importance and priority changes. This not only indicates that changes are necessary, but that a change would affect all Canadian industries and will promote increased innovation throughout Canada.

Current respondents are very familiar with the SR&ED program and are providing results and commentary that is extremely interesting and informative on the current structure of the program.

Over 60% of current respondents indicate that the system does not currently allow their company full access to the benefits of the SR&ED program, while 65% of current respondents indicate there is a need to expand the current scope of business entities entitled to refundable tax credits and expanding the current dollar caps on net revenues, capital tax, and the $2M expenditure limit.

Comments provided by respondents to date, have indicated a recurring issue with regards to the need to expand the scope of eligible expenditures in the following areas:

    • Patent costs
    • Product Testing
    • Work performed outside of Canada & Foreign contractors working on Canadian R&D projects
    • Initial introduction of product/service to market
    • Market/technology strategy evaluations

Over 62% of current respondents have identified the inclusion of costs for R&D work carried on outside of Canada as a priority area to make changes in the program, while 64% have indicated the inclusion of costs associated with the purchase of IP, rights, and technologies required for projects to be a priority.

In regards to current program Administrative practices, an approximately equal response and commentary, both strongly positive and strongly negative, has been received relating to practice consistency, timeliness, interpretive policy/practice, and cost of compliance.

Next Steps

Survey results will continue to be collected and analyzed as results are obtained. The idea is to use the results as input for discussions with each of the participating associations. Regional and individual meetings across the country are being planned by CATA to be held to discuss the priority issues further, and will aid in the preparation of a White Paper. The White Paper will discuss the current SR&ED program and identify issues and provide recommendations for the Government in hopes of influencing the next budget.

Important Note:

The survey will be available for the next several weeks. We encourage the participation of all SR&ED performers. If you have not already completed the survey, please access the survey at: http://www.e-penso.com/survey/s?s=CATASRED

We also ask that you contact your colleagues who may be interested in participating and ask them to also complete the survey.