Reduction in Canadian SR&ED Tax Incentives

The Scientific Research and Experimental Development (SR&ED) tax incentives support business innovation and encourage economic growth in Canada. The Canadian Advanced Technology Alliance (CATA) senior vice president of tax, finance, and advocacy, Russ Roberts, and wife Catherine Bishop, CATA’s research director, reported a $5.3 billion reduction in funding for innovation as a result of reducing the value of Canada Revenue Agency (CRA)-issued SR&ED tax credits.

Roberts supports the federal governments review of the SR&ED tax incentive, which was announced in its 2017 budget, stating he sees it as “an opportunity to address the issue of making it work effectively across the country.” He believes Canadian businesses have missed out on over $1 billion in SR&ED tax incentives due to unclear legislation, restrictive administration practices, and narrowed SR&ED eligibility criteria.

In their report, Robert and Bishop note the SR&ED tax incentive program has experienced increased overhead costs and has seen a decline in the number of claims processed.  The taxes recovered during the report period have declined from $424 million in 2011 to $394 million in 2014.

Despite the negative findings of the report, Robert believes the silver lining is that the results are being shared with the current Liberal government, which has been receptive to discussion of how to improve the current situation and discuss the program.

Tax credits are available to Canadian businesses and individuals involved in research and development in Canada. To learn more about the Canadian SR&ED tax incentives program, contact Swanson Reed R&D Tax Advisors.