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CATAAlliance

Submission — CATAAlliance

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Submitter(s): Reid, John

Summary: We argue that it is critical that an improved 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 the effective, broad based incentives for which they were designed. They are seen to lack the requisite predictability, timeliness, and cost-effectiveness. As well, the current, emerging, narrow focus of the Canadian Revenue Agency (CRA) as to:

  • what is supported as a technological advance;
  • how eligibility for SR&ED tax credits is assessed; and
  • how SR&ED claims should be documented is simply not consistent with the delivery of a broad based incentive that promotes innovation outside dedicated R&D settings focused on developing new core technologies. The result is that the current credits are of limited use exactly where most of the R&D needs to be conducted by Canadian businesses to get Canada's medium- and small-businesses to innovate.

We note that this narrow focus was not what Parliament historically intended when it created these incentives. The SR&ED tax credits were to provide incentives that encouraged technological based innovation in a broad spectrum of business environments, particularly the highly integrated development environments common to Canadian businesses. It is in exactly these situations that current CRA emerging practices are seriously and negatively impacting on the tax credit's effectiveness.

Full submission: PDF Version