The Importance of Effective Tax Based Support for Innovation—SR&ED Engagement Campaign: Act Today
February 13, 2011

CATAAlliance Memo

Attn: Canada’s SR&ED Community

Re: The Importance of Effective  Tax Based Support for Innovation—SR&ED Engagement Campaign

From: John Reid, CEO, CATAAlliance (

Dear SR&ED Community Executives

We have prepared an Open Letter regarding the importance of effective  tax based support for innovation to The Hon. Jim Flaherty, Minister of Finance, The Hon. Keith Ashfield, Minister of National Revenue, The Hon. Tony Clement, Minister of Industry; and The Hon. Dr. Gary Goodyear, Minister of State (Science and Technology) and Tom Jenkins, Chair, Expert Panel Review of Federal Government's Research and Development Support for Private Sector Innovation.

Dr. Russ Roberts, a recognized thought leader in the field, worked with program experts in its development; we have consulted widely across all sectors in preparing the Open Letter.

We see a significant opportunity to create a more effective environment for these important incentives. In the meantime we are calling for short term remedial action by the Government to assist firms currently using the SR&ED credits.

Please Download the Full Version of the Open Letter

++ How Can You Engage in the SR&ED Campaign

If your organization wishes to simply endorse the Open Letter (please download the pdf), then please contact Russ Roberts directly at email "Russ Roberts" and he can provide the simple steps for doing do.

If your organization wishes to make use of the contents of the Open Letter for your individual submission to Ministers, Panel Chair or other influencers then please feel free to do so. Dr. Roberts at "Russ Roberts"  is available to answer any questions that you may have and to also provide you with available research..

Individual community executives are also encouraged to endorse and/or submit views to Ministers, Panel and influencers, including media.

Please join our moderated SR&ED Group (400 members) on Linkedin to comment, raise issues and network with peers.

Executive Summary

We argue that it is critical that a revitalized framework be developed to provide broadly targeted, tax based incentives for business innovation.  Tax based incentives are the one mechanism that have the agility to help companies respond to opportunities they identify in today's rapidly evolving business environment.  As well, tax based incentives can help counteract the impact of the high Canadian dollar which encourages companies to make R&D investments offshore rather than in Canada.

We are frustrated that the current Scientific Research and Experimental Development (SR&ED) tax credits are not delivering effective incentives for what they were designed.  They are seen to lack the requisite predictability, timeliness, and cost-effectiveness.  The current narrow focus of the Canadian Revenue Agency (CRA) as to what is supported and how SR&ED claims should be documented is simply not delivering the broad based incentive that Parliaments have historically intended. 

We call on the Government to immediately take interim actions to correct the current system of SR&ED tax credits to ensure that companies are able to obtain with confidence current entitlements as historically provided in policy.  This is not the case today.

 We call on the Panel during its review to:

·        develop a revitalized legislative and managerial framework that eliminates legislative and managerial sources of inefficiencies associated with the current system; and

·        determine how best to target tax based incentives to become an agile, responsive, universal incentive for Canadian businesses to innovate in all sectors and business environments.

We argue that the new system should draw from what does work in the current system and also incorporate legislative and managerial improvements that eliminate current inefficiencies.