Establishing Competitiveness In Innovation
Technology and innovation are essential in the global economy. However, when compared to its peers, Canada has been lagging behind. Due to this, the government needs to step up its game by simplifying the tax credit structure and the regime in both the public and private sectors.
In 2016, the Canadian Chamber of Commerce proposed an “innovation box” structure. This would ensure that any sales or revenues earned on a new technology or patent, which had been developed within the country, would be taxed at a significantly lower rate. They also mentioned the need for an effective and aggressive innovation plan in order to make the most of innovation in the public and private sectors.
Further to this, the federal government released an outline of its direction for an inclusive innovation agenda for the public and private sectors in its 2016 budget. The foundation that would drive this agenda forward would be national collaboration. In addition, six areas of action were identified. These were:
- Entrepreneurial and creative society;
- Global science excellence;
- World-leading clusters and partnerships;
- Grow companies and accelerate clean growth;
- Compete in a digital world;
- Ease of doing business.
While the businesses in Canada may not be able to compete with their global counterparts in terms of price, they will be able to compete in terms of innovation. In order to achieve this, the country should be willing to devote resources to research and development.
Currently, Canada is the only developed country in the world with an intellectual property deficit. Much is spent on importing technology from other countries instead of selling local technology abroad. This gap costs the country $4.5 billion per annum.
The establishment of the SR&ED program, among others, in the country has had a positive impact on the competitive advantage of the Canadian firms. However, more needs to be done. Some of the moves that could be implemented would be to restore the tax credit limit for innovation to 20%. In addition, to regain the effectiveness of a tax incentive, it must be made easier to use and access for employers of all sizes and industries in both the public and private sectors.