SR&ED in the 2012 Canadian Federal Budget: Party Positions on Innovation Funding
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With the storm of discussion around proposed changes to the SR&ED tax incentive program over the past months, it can be difficult to determine exactly where Canada’s political parties stand on the issue of R&D and innovation in Canada. The 2012 Canadian Federal Budget proposed changes to SR&ED. This week, SREDucation has compiled the stances of each major political party, pulling past and more recent information to provide an overview.
In recent years, the Liberal party has favoured a wide variety of policies from both the right and left sides of the political spectrum. When the Liberals formed the government from 1993 to 2006, the party was a strong champion of balanced budgets, and eliminated the budget deficit completely from the federal budget in 1995 by a combination of reducing overall spending on social programs and delegating responsibility to the provinces. During this period, The Liberal also party promised to replace the Goods and Services Tax (GST) in the party’s famous Red Book (Creating Opportunity: The Liberal Plan for Canada), that was released in 1993 and outlined the Liberal platform.
(Reference: Liberal Party of Canada – Principles and Policies)
Opinion on Innovation Funding/SR&ED
On February 3rd, 2012, Ted Hsu (Liberal Critic for Science and Technology) wrote an article for the Liberal party’s official blog outlining his opinions on how to improve current administrative issues in the SR&ED tax incentive claiming process. His views are quoted in length below:
Most people would agree that there are too many illegitimate SR&ED claims. Too often the decision to make a claim is done after the fact, often at the suggestion of a claims processor, trolling for possible claims and working on a contingency fee. In instances like this, even if the tax credit is ploughed back into the business, it does not work as an incentive to invest in innovation and commercialization.
The following are two recommendations based on suggestions I have heard from people who have used the SR&ED program.
1. To require companies to notify the Canada Revenue Agency within three months of the start of a project that will eventually lead to a SR&ED application. This statement of intention and brief description of expectations would limit the amount of retrospective SR&ED trolling by consultants.
The CRA would immediately acknowledge receipt of the notification, not as a pre-approval but as an agreed start date for which a future SR&ED claim could be made. Companies could quickly file amended statements should their research lead them in an entirely different direction.
2. The time it takes to process SR&ED claims must be reduced. Currently a firm has up to 18 months to apply and the CRA may take up to a year to audit their claim. Amid growing, research-intensive companies tend to move around and knowledge of a research endeavour, as well as documentation, can be lost. Sorting all this out leads to extra costs for the company and extra man-hours, which means tax dollars, for CRA employees. Allowing a maximum of six months to file a claim would help reduce this problem.
Reference and full article: Liberal blog – Fixing the administrative problems with Scientific Research and Experimental Development)
The Conservative Party generally favours lower taxes, smaller government, more decentralization of federal government powers to the provinces, modeled after the Meech Lake Accord, and a tougher stand on “law and order” issues.
(Reference: Conservative Party of Canada – Principles and Policies)
Opinion on Innovation Funding/SR&ED
Canada’s Conservative party specifically outlined their stance on the important of funding to fuel innovation, demonstrating not only their plans for the future, but also their past contributions to Canadian innovation. The relevant details are quoted below:
Low-Tax Plan for Jobs and Economic Growth: SUPPORT FOR RESEARCH AND DEVELOPMENT – Our goal is to promote innovation – and ultimately to help create good new jobs and foster long-term economic growth. In the past, the Conservatives have championed the causes below, and will likely continue to do so in the future.
- made substantial new investments in research and development through Canada’s research granting councils;
- established the Canada Excellence Research Chairs Program, to attract and retain the world’s top researchers;
- established the Vanier Canada Graduate Scholarships and the Banting Postdoctoral Fellowships, to attract and retain the brightest minds from Canada and around the world;
- provided new funds to the National Research Council’s Industrial Research Assistance Program, to expand its initiatives for small- and medium-sized enterprises;
- established the Strategic Aerospace and Defence Initiative to support excellence in Canadian research and development in aerospace and defence; and
- Supported leading-edge Canadian scientific endeavours through organizations such as the Canadian Space Agency, the Rick Hansen Foundation, and the Institute for Quantum Computing.
(Reference: Stephen Harper’s Low-Tax Plan for Jobs and Economic Growth)
New Democratic Party
The New Democratic Party has historically favoured public transportation funds, higher corporate taxes overall but with lower rates for small businesses.
(Reference: New Democratic Party of Canada – Principles and policies)
Opinion on Innovation Funding/SR&ED
Invest in innovation strategy to create jobs: New Democrats today [ed: Oct 17, 2011] blasted the Harper government for costing Canada thousands of good jobs by failing to lead on research and development funding, and called for a national innovation strategy to bolster high-paying Canadian jobs.
With the release of the long-awaited report by the Expert Panel on Federal Research and Development Spending, Hélène LeBlanc (Lasalle-Émard), New Democrat Critic for Science and Technology, pointed to government inaction as the reason innovation in Canada has fallen so far behind.
(Reference and full article: NDP Press Releases – Invest in innovation strategies to create new jobs)
New Democrats push “open source” for innovation: As part of an effort to make government departments more open and responsive to Canadians, the New Democrats have introduced a Parliamentary Motion (M- 587) calling for support for Open Source technologies.
“Under the Conservative government, Canada has fallen further and further behind when it comes to being an international leader on digital innovation,” said New Democrat Digital Issues Critic Charlie Angus (Timmins – James Bay). “To make bureaucracies more innovative and able to respond to the changing needs of Canadians, the federal government needs to get serious about open source technologies.”
As part of a much needed digital strategy, Angus’ motion calls on the government to be more open with online data that can be utilized by the public. He is careful to point out that support for Open Source and Open Data programs will, of course, need to take into account issues of privacy and national security.
“Digital culture offers us an immense opportunity to ensure that government becomes more responsive to public needs. While many municipal governments have already moved to innovative ‘open data’ programs, the federal bureaucracy remains stuck in 20th century red tape.”
(Reference and full article: NDP Press Releases – New Democrats push “open source” for innovation)
For more posts related to SR&ED and the 2012 Canadian Federal Budget please see our posts here and here.