December 7, 2018

SR&ED Tax Incentive Program Update (Dec. 2018): Can management changes alone help or will systemic and structural issues prevail?


Russ Roberts, Senior Vice President, Tax, Finance & Advocacy, CATAAlliance (email:

Changes at the CRA

Jason Charron is the new Director General of the Scientific Research and Experimental Development (SR&ED) Directorate. Viewed as an outsider to the CRA, a CPA/MBA, and previously the Executive Director of IRAP at the NRC. Most recently, he was Executive Director Transformation, Comptroller General’s Office, Treasury Board Secretariat.  Mr. Charron has the background needed to assist the Government in understanding the challenges the current SR&ED program presents and in determining how the program can be improved.

Mr. Charron has been with the CRA since May and has contributed to the Directorate’s recently completed initiative to clarify what’s eligible for SR&ED in the ICT sector.

The SR&ED Directorate has been putting on technical workshops in the ICT sector across the country, this fall: “SR&ED national industry engagement technical workshops in the ICT sector.”

Below are links provided by the CRA to background information, including or a transcript and recording on the Eligibility of work specifically focused on the ICT sector from a previous webinar.   

The CRA’s current workshops are aimed at two target audiences: ICT executives wanting to understand the key elements of SR&ED, and those actually involved in developing the claims and supporting them when audits occur.

Some takeaways from the workshop session I attended for executives in Ottawa in November were that the CRA encourages to use two “new” claiming practices that could provide increased certainty about a company’s claims.  Both seem to be modifications of approaches of historical claiming practices offered by the CRA.

  • Pre-Claim Consultation (PCC) provides a binding predetermination by the CRA of eligibility for potential projects.  Go to Pre-Claim Consultation (PCC) for details; and
  • Real Time Reviews for larger, presumably more complex claims and claims for multiple projects.

Both approaches encourage contemporaneous development of support and the up-front identification of SR&ED projects.  The CRA seemed to be discouraging retrospective claiming practices that identify after-the-fact potential SR&ED projects and then try to develop the support.

The explanation of eligibility presented in the slides and supporting material that they have posted was useful in that it is consistent with what I see as the CRA’s current public policy; – although, in my experience, not necessarily aligned with both CRA and Industry’s interpretation of the law over the years.  In my opinion, the explanation seems relatively clearly expressed.

However, the actual discussions of eligibility that occurred in the workshop session suggested that there is a great deal of confusion amongst all parties, including the presenters, about the terms: “innovation”, “technological innovation”, and “technological advancement” (i.e., the crux of the issue about what is SR&ED).  The distinction between “technological risk” and “technological uncertainty” was particularly unclear – the terms perhaps being used interchangeably.

Listening to this session, one has to ask whether innovation in the ICT sector was really supported by SR&ED incentives or whether something broader is needed.  There was either a lot of confusion amongst the parties or disagreement.

Also, from the discussion, it was unclear where all this was headed. As the Government’s review of the SR&ED program (understood to be led by Finance) continues, we would hope to see some clear answers.

Clearly, management at the CRA is showing initiative.  However, it is unlikely that the introduction of a new Director General alone can address the community’s concerns about the structural and management challenges associated with the program (i.e., the fundamental interpretive issues caused by Finance’s conflicted legislation; and, more generally, by the CRA’s broad spread structural and managerial issues that have impacted its management of all tax benefits).  

While not looking at the SR&ED program, the 2018 Fall Reports of the Auditor General of Canada (Report 7, “Compliance Activities – Canada Revenue Agency”) highlights the difficulty that the CRA is having in managing tax programs fairly and consistently.  

Recent CBC reports have also highlighted the CRA’s managerial issues.  For example, see:

You can argue that structural issues like these are simply common to many large organizations, both in the private and public sectors.  Issues of managing large, decentralized organizations are well known. Are we not back to whether the CRA is the right organization to manage the SR&ED incentives, given the CRA’s well documented systemic problems?  

CATA’s position is that the CRA is not the right organization.  It has had decades to do it right.

For attendees of the CRA’S SR&ED national industry engagement technical workshops in the ICT sector (referred to above), please help us by completing a short Survey on the Workshops by going to this URL:

We want to understand your evaluation of these important ICT focused SR&ED technical workshops.

For the CRA’s most recent explanation of their generic SR&ED policy, see: Eligibility of Work for SR&ED Investment Tax Credits Policy

Recent Evolutions in the Government’s thinking re ICT long term contribution to the Canadian Economy

In October, the Government  released their “Economic Strategy Table for Digital Industries” ( See for details ).  Cindy  Gordon, Founder & CEO, SalesChoice & CATA Spokesperson has participated in this exercise for us.

The report focuses on improving our R&D investments by focusing on commercialization, by promoting high growth Canadian headquartered firms, and by improving our returns on Canadians’ investments in IP with a new IP regime.  As well, the report includes the recommendation for refocusing SR&ED, albeit keeping the CRA as the administrator. It also has a relatively comprehensive set of recommendations which address other issues such as skills/talent.

In the context of an improved IP regime, the report does not seem to have addressed whether there is a need to see if a more balanced treatment of offshored IP is needed to better promote its exploitation to the fullest benefit of Canadians – as other countries are doing.  And, for that matter, the report does not examine whether fiscal incentives should be created to encourage more companies to protect their IP. Admittedly, these are complex tax oriented questions. But CATA continues to hope that these questions are addressed by Finance, given their significance.  

CATA Call for Action

John Reid and I have led a multi-disciplinary team to create 5 public policy recommendations for all political parties.  To help advance this advocacy, we have created a Petition that we now ask you to sign and share with your peers: please go to:

Here are the 5 recommendations:

  1. Recognize that while Canada remains strong in terms of the quality and impact of its scientific output, it is lagging further and further behind in its ability to commercialize that output and generate wealth
  2. Create a 21st Century Tax Commission focused on improving the nation’s support for innovation through fiscal measures, test all recommended measures through robust public consultations, and deliver a final report in twelve months
  3. Complete the SR&ED review with proposed improvements and then test them through robust public consultations
  4. Support current work on developing a modern IP (intellectual property) system with appropriate fiscal measures for IP exploitation in Canada and also provide assistance to cover some of the costs of the patent process
  5. Publish benchmarking metrics comparing Canada to other leading countries building innovative capacity

Adopting these recommendations will bring us much closer to having a system of innovation in which government, universities and the private sector work more closely together to move from invention to commercially viable solutions. This will not only create jobs, retain our talent in Canada, but also provide more solid returns to Canadians.

Thank you for signing the E-Petition.

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Call to Action!

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