Billions of Dollars Cut From Innovation Funding

Over the years, the Canadian Advanced Technology Alliance (CATA) has argued that while Canada’s innovation agenda receives a lot of hype, the federal government has been reducing SR&ED tax incentives, effectively diminishing innovation funding by billions of dollars.

Russ Roberts, the Vice President of CATA has maintained that he has the figures to show that between 2009 and 2016, the Canadian government reduced its innovation funding by $5.3 billion by steadily reducing the value of CRA-issued SR&ED tax credits. CATA are not being malicious; they have categorically stated that what they intend to do is spark a fruitful discussion between the tech industry and the federal government, to ensure that the tax system benefits innovative firms.

Polls and posts on social media have recommended that there be reviews and changes to the current rules and regulations in the SR&ED program. Roberts has stated that if the legislation is not defined clearly enough, it can cause the program to become overly restrictive. Many feel that the tightened eligibility criteria, which has come into play over the past 5 years, has dissuaded many companies from applying.

In 2011, the CRA processed approximately 29,000 SR&ED claims, leading to $3.6 billion in tax credits for the qualifying corporations and individuals. In 2015, this number dropped to 23,000, which provided around $3 billion in tax incentives. If the government is wanting to encourage more innovation, the numbers should be going up rather than down. However, despite the drop in the number of businesses claiming the incentive, the CRA’s approval rate did not change and remained at around 90 percent.

In the 2017, the federal government stated that it would be reviewing the SR&ED tax incentive program, although it was not made clear what form this would take.