By:Russ Roberts, PhD
Senior Vice President, CATAAlliance
Some 11,000 plus Canadian Controlled Private Corporations (CCPCs) claim Scientific Research and Experimental Development (SR&ED) tax incentives. They include small- and medium-sized private firms that use Canada’s Refundable SR&ED tax credits each year. Canada puts over $1 billion a year into helping these firms develop their technologies through the SR&ED program.
These firms and their talent are extremely vulnerable to the COVID-19 driven recession, as is Canada’s investment in their talent and technologies. The CATAAlliance has called on the Federal Government for targeted funding to provide bridge support for these firms during this crisis. Canada cannot afford to lose these firms; they are critical to Canada’s recovery and future growth. Link: https://cata.ca/2020/proposing-fast-funds-to-small-business-tech/
However, there’s an albatross out there as governments ramp up urgently needed support for Canadian businesses. The Prime Minister has warned against scamming government efforts to save our businesses and their employees.
Unfortunately, I believe the Prime Minister has a very legitimate concern. I’ve repeatedly seen the major problems that can be created by government efforts to help business throughout my career, in both the public and private sectors, as the Senior Science Advisor for the SR&ED program during its inception, as Acting Director of Innovation Policy with a predecessor of ISTC, and as a senior consultant to companies on their SR&ED claims.
I find that, eventually, government catches onto aggressive behaviour and that the damage caused by the corrective actions they take can be hugely damaging to the very firms and their owners that the government was trying to help.
Frankly, there is nothing more frustrating than to sit with a well intentioned business owner who pushed the envelope and have to tell them that this is going to happen, knowing that the outcome is likely the shutting-down of the business.
I urge that all of us who are searching for assistance for the business community at this time of crisis be equally focused on getting the business community to do it right and recognize the consequences of failing to do so. Our businesses cannot afford the alternative.
In my experience, the SR&ED program is an example of what can happen.
The program has gone through a number of challenging periods over its 35 years where files piled up and CRA struggled to sort out the good from the bad. Many of these problematic periods were caused by the governments of the time trying to assist businesses and things getting out of control. The ultimate question for both parties at times like this is: Is it worth keeping this kind of support? In the case of the SR&ED program, we’ve just got back to the point where we are hearing of more positive experiences than negative.
Let’s listen to the Prime Minister’s call for restraint as we work with governments to assist our businesses.
I encourage the leaders of our business communities to promote this message as they work to obtain assistance.