SR&ED Advocacy Update (December 2007)
December 05, 2007

The Department of Finance and the Canada Revenue Agency (CRA) are just completing their joint consultations on how the SR&ED program can be improved. Member contributions to these consultations have been invaluable through your attendance at focus groups, one on one interviews and Survey responses. Your input has led to other associations and government officials recognizing the issues that exist across all industry sectors nationally and discussing effective solutions.

In CATA’s discussions with the Department of Finance, we have taken the position that clarification / simplification of the current legislation and administrative improvements are critical to the ongoing success of the program. As well, we argued that the current legislation and CRA practices are highly distortive, and thus not providing a level investment environment for all firms wishing to innovate. We have called for the removal of unsatisfactory legislative provisions and administrative practices, and for some form of universal access to the refundable tax credits for all firms.

For the details of the CATA submission, go to:

http://www.cata.ca/Media_and_Events/Press_Releases/cata_pr11300701.html

The discussion with the Finance officials was very interesting; by the time our SR&ED team met with them, Consultation officials had heard enough feedback on the administrative problems, and instead asked us to move on to the discussion of solutions. The initial approach of Finance officials to the administration problems seemed to be to maintain the status quo but to strengthen their technical team and mandates.

CATA’s position was that this was not enough. We discussed the cycles that have repeatedly occurred and argued that those problematic periods of highly restrictive, confrontational and inconsistent policy application occurring every 5 years or so were simply not acceptable. We argued that these periods seemed to be driven by fundamental Agency prejudices which focus on compliance and accuracy rather than on the cost-effective delivery of entitlements appropriately in a material sense. The essence of the discussion was that the Government needed to find a way to provide the appropriate environment for the stable administration of the program whether in the CRA or elsewhere.

The CATA team also met with Minister Gordon O’Connor’s staff, including his Chief of Staff. The ministerial staff assured us that the Government takes this program seriously and that if change was needed, it would be undertaken. Similar commitments to improvements have been made in our discussions with Minister Jim Flaherty’s staff.

Next Steps:

  • CATA will be developing a short budget submission which focuses on promoting commercialization of SR&ED through an integrated set of tax measures. These ideas were outlined in the SR&ED submission and they will be expanded on.

  • At this point, it is critical for your MPs (see contact url below) to hear of the importance of improvements and of your support for the Government’s initiative in respect to the SR&ED Tax Credits. If you are speaking with them, mention it. If you will not be meeting them, write to them about the importance of improvements in the tax credits to your firm. You may wish to focus both on administrative improvements and effective legislation. Your input is critical.

    http://www.parl.gc.ca/common/SenatorsMembers_house.asp?Language=E&Parl=37&Ses=2&Sect=hoccur

++ Action Item: Please provide your guidance on these matters to John Reid, CATA’s President or Russ Roberts, CATA’s Senior Advisor for Tax & Finance, at info@cata.ca with SR&ED in the Header.