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SR&ED in the Media

SR&ED seems to be a tax incentive that people love to hate. It’s no real secret among those in the community that SR&ED is a highly contentious tax credit, but why is there such continuous debate over the program?

SR&ED has a long history of back-and-forth discussion or outright criticisms over the changing policies, administration and review practices that govern this multi-billion dollar Canadian tax incentive. Prominent newspapers and media outlets such as The Globe & Mail and CBC are particularly fond of launching scathing criticisms against the program– sometimes based only on the opinions of a single, potentially biased source.

IMPORTANT: Just because you read something in the news doesn’t mean it’s the whole truth! Be sure to use your own judgement and question the ‘facts’ of each article.


Business in Vancouver

Vancouver electric carmaker delivers first vehicle

Tyler Orton, Business in Vancouver.

June 27, 2017. In this article, Orton examines the production of electronic vehicles (EVs) by companies in Vancouver and what significance ear-marking funding from the provincial government would have on supplying more EVs.

Orton quotes Leona Green, one of the owners of Greens and Beans (a local deli in New Westminster), as Green had paid $2,000 two years earlier as a deposit on an EV. Green stated, “two years was too long […] they really do need to start mass-producing [EVs] somewhere.” In the article, Jerry Kroll (who at the time of writing was the CEO of Electra Meccanica (EM) (makers of EVs in Vancouver) and who also ran under the BC Green Party in the 2017 provincial election) states that EM has a limited capacity (between “two and 10 vehicles per month”) however, it has “orders for 500 vehicles”.

Kroll and Bruce Sharpe, president at the time of writing of the Vancouver Electric Vehicle Association are critical of the government’s limited resources focussed on EVs. The article highlights that although the SR&ED tax credit and the “small-business venture capital tax credit” programs could be used for the research and development aspects of EVs, the “federal version of SR&ED does not offer targeted tax credits to business working in EVs.” Sharpe goes on to note that most of the risk-taking taken in order to develop EVs has been from private business: “If it wasn’t for […] Tesla and […] Nissan really going out on a limb and taking some big risks to develop [EVs], we probably wouldn’t have them today.”

Globe and Mail

Ottawa tightens screws on R&D incentive program

 Brenda Bouw, Globe and Mail.

June 13, 2017. This article argues the Canada Revenue Agency (CRA) was “cracking down” on SR&ED tax credit claims. Bouw attributes a “drop in the volume of claims and the number of filers” from “30,500 and about $3.5-billion in credits in 2010-11” to “24,300 claims [… and] about $3.1-billion […] in 2014-15” due to the CRA becoming “more stringent with the [SR&ED] program in recent years.” Bouw quotes a “CRA spokesperson” who stated, “the 2012 federal budget made the SR&ED program ‘more cost-effective and less generous’,” and that “budget announcements, along with the ongoing compliance activities conducted by the CRA, may have affected the intake of [SR&ED] claims.”

This article suggests that “compliance activities” are an “administrative headache.” While Bouw quotes Markus Latzel (chief executive of a Toronto-based web-content management company) in stating that SR&ED is “not easy money,” Latzel also highlights that for some companies “SR&ED has been an incentive for the company to do more R&D to help it grow.”

A better way for government to help ‘pick’ tech winners

David Ross, Guest Contributor, Globe and Mail.

June 6, 2017. In this article, Ross discusses the Canadian government’s 2017 innovation initiatives, including SR&ED ($4-billion), the Industrial Research Assistance Program (IRAP) ($175-million) and the Innovation Superclusters Initiative (ISI) ($950-million). Ottawa introduced ISI in 2017 to “choose and support the development of specific technologies where Canada can win globally,” through encouraging companies to establish “superclusters” with start-ups and research institutions to develop marketable ideas. IRAP uses advisors to provide “grants to companies with good technology ideas and a high likelihood of successfully bringing them to market.” Ross highlights that these stand in contrast to the SR&ED program, where businesses can claim SR&ED tax credits “regardless of a proven market need or path to market.” While Ross admits that IRAP and ISI are “great programs” he notes, “they do have a feel of a planned economy rather than free market, with government ultimately choosing where the money goes” whereas “no venture capitalists would hand out money to start-ups without a proven business plan;” whereas he suggests this is what the SR&ED program does.

Ross highlights that SR&ED “decreases the cash returned to companies as they grow or become mildly profitable” and argues that this leads to “an enormous number of tiny start-ups, a declining number of mid-sized Canadian tech companies and very few Canadian tech giants.” However, Ross believes that Canada does not have “an innovation problem,” instead “a commercialization of innovation problem.” Ross suggests perhaps “[Canada] should be redirecting some … funding to mid-market winners with proven track records that are reinvesting in R&D rather than endless start-ups” as mid-market companies have “proven business plans with proven paths to export markets.” Ross notes, “when start-ups transition into medium-sized companies, the SR&ED cash rebates plunge and the search for alternative funding begins.” He suggests this hunt for funding leads to these businesses being “almost always sold to larger U.S. companies,” becoming “R&D outposts” while most other jobs go to “the United States in addition to the financial rewards.”

Ross concludes that Canada should do more to encourage “mid-sized companies to scale and compete on the global stage” and ensure that SR&ED is not cut drastically once a start-up grows, instead “decreasing the [drop in funding] in proportion to company exports” could be an “easy yet powerful mechanism to make this happen.”

Vancouver Sun

Make automation key to canada’s economy; Embracing innovation is the best way to create new jobs, Wal van Lierop writes

Walter Van Lierop, Guest Contributor, Vancouver Sun.

February 6, 2017. This article highlights the importance of technology in redesigning Canada’s “innovation ecosystem.” Lierop highlights discussions held at the World Economic Forum in Davos, Switzerland in 2017, including “ways to mitigate the inequalities automation will produce.” Lierop suggests Canada could “build [automation] technology ourselves and thereby create new jobs to replace the old” and later the article highlights countries that have begun “investing in robotics” such as China, as the country is “aware that countries with cheaper labour will otherwise steal its lunch.”

Lierop suggests that the SR&ED program be “modi[fied]” to “spur an innovation ecosystem that taps into Canada’s strengths” by giving the “biggest tax breaks and subsidies to startups that have the most potential to scale and stimulate other sectors of the economy.” Lierop uses the example that “in B.C., we’d prioritize startups in industrial innovation given their ability to serve resource extraction operations nearby” and later emphasizes this point to cover Canada’s primary exports and suggests Canada “becomes a global exporter of industrial technology.”


Alberta Oil

Don’t Take Government Research Tax Credits For Granted

Michael Bosdet, guest contributor, Alberta Oil.

October 26, 2016. This article examines the role of SR&ED’s in mergers and acquisitions (M&A). As companies believe they have no use for non-refundable tax credits, this potential source of funding is often overlooked.

What many organizations do not realize is that SR&ED Investment Tax Credits (ITCs) can be used post-acquisition, “provided the acquirer is a for-profit entity in the same or similar business”. This allows SR&ED claims to potentially exceed capital acquired from refundable ITCs as, “any non-refundable ITCs will increase valuation”.

Additionally, Bosdet states that filing a SR&ED claim can generate a “qualified expenditure pool” which can then be applied in a similar way to a non-capital loss pool. Amounts in the SR&ED pool can be carried forward indefinitely and can be used post-acquisition.

Globe and Mail

Canada’s R&D tax credit doesn’t pass the test for evidence-based policy

Creso Sá, Globe and Mail.

August 9, 2016. Unlike many of the articles in this section, which attack the SR&ED program for its perceived complexity and potential for abuse, this article adds the idea that because it is an indirect funding source the SR&ED program is fundamentally ineffective.

Sá’s argument rests on correlations. He states that because Canada’s expenditures on indirect investment (such as the SR&ED program) are relatively higher than those of other developed countries, and because expenditures on R&D, proportional to GDP (Gross Domestic Product), have declined since the year 2000, the SR&ED program must be to blame. Sá also suggests that those companies who do receive SR&ED funding are not capable of innovating, because “only about a dozen firms have sizeable R&D budgets in Canada.”

Ultimately, Sá argues that an evidenced-based policy decision would be to abandon the SR&ED program, and consider proposals brought forward by the Science Technology and Innovation Council and the Council of Canadian Academies.

No one wants to talk about it, but Canada’s R&D programs are failing

Jeffrey Dale, guest contributor, Globe and Mail.

March 16, 2016. This article directly attributes the strategic failures of three large Canadian businesses (Nortel, Blackberry, and Bombardier) to the fact that market research is not an eligible activity under the SR&ED program.

Dale also states that “research and development investment by governments is focused on peer-reviewed academic research that is not linked to any industrial strategy.”

He suggests that the kind of R&D encouraged by the SR&ED program is not the research necessary to help Canadian businesses succeed. According to Dale, the SR&ED program results in Canadian businesses allocating too many resources towards the incremental development of new technologies, and not enough on towards predicting and disrupting changing markets.

Ottawa Business Journal

Peter Kovessy, Ottawa Business Journal.

November 22, 2016
Kovessy describes the latest Canadian Advanced Technology Alliance (CATA) report on federal SR&ED spending. CATA is a group currently lobbying for broad changes to the way that the SR&ED program is administered. They are seeking to have the SR&ED program be administered by an organization other than the CRA.

The article goes on to describe some of the most common criticisms of the SR&ED program by both supporters and critics: that the program is too complex, that too much of the funds are redirected towards consultants, and that it does not incentivize true innovation, rather, it incentivizes complying strictly with the CRA’S regulations.

Where did Innovation Nation go? 

Jeffrey Dale, guest contributor, Ottawa Business Journal.

August 9, 2016. This, article, by the same author as “No one wants to talk about it, but Canada’s R&D programs are failing” (above), and with a very similar thesis,  sets out to answer the question: “What happened to Canadian innovation?” As many similar articles do, Dale looks at this question through the lens of three famously struggling or defunct Canadian innovators: Bombardier, BlackBerry, and Nortel. He sets up the argument that our research funding program is broken by describing the failures of all three as fundamental failures of R&D. He goes on to say that the problem with the Canadian innovation funding program is that it funds pure research more effectively than it funds market research.

Dale argues that the SR&ED program should be broken down into parts based on the business stage of the applicant. While his plan is vague, his argument seems to be towards direct funding or a program in which the government chooses which research areas should be funded.


Globe and Mail

Generous Business Loans Come with R&D Tax Crackdown

Barrie McKenna, Globe and Mail.

April 12, 2015. This article catalogues the strategies used by the Canada Revenue Agency (CRA) to reduce SR&ED spending since it peaked in 2008. The combination of 2012’s new regulations on qualified expenditures, as well as changing technical scrutiny from the CRA, resulted in (at the time of writing) 80 SR&ED related cases before the Tax Court of Canada.

McKenna draws a connection between these tactics and large direct loans being paid to companies as evidence of the Conservative government’s changing priorities. He interprets the increased appeals and court cases as supporting his long-held argument that Canadian businesses are too dependent on SR&ED tax credits.


Globe and Mail

Shredding Some Myths about Canada’s Tech Startup Subsidies

Shane Dingman, Globe and Mail.

May 30, 2014. This piece sets out to dispel some myths that uninformed businesspeople might have about the SR&ED tax credit program. Responding to a Wall Street Journal article on entrepreneur Adam Adelman, who moved his startup Mighty Cast to Canada partially to take advantage of the SR&ED program, the article attempts to reign in some of the over-optimistic expectations it may have created.

The Wall Street Journal Article describes the SR&ED tax credit as being a general business subsidy available to all startups, rather than something with rigid requirements for scientific research. Dingman talks to members of the Canadian business community to get a more accurate picture of how the SR&ED program works.

Picking up the themes of other recent articles on SR&ED, this one points out that the application process has become more difficult in recent years, with less overall spending by the CRA.


Financial Post

Mission Critical; How changing government R&D incentives can impact our ability to compete

Denise Deveau, Financial Post.

May 23, 2013. In this article Deveau examines the opinions, regarding the changes Ottawa made to research and development (R&D) funding, of Todd Tessier (CFO Recon Instruments), Lynda Leonard (senior vice president for Information Technology Association of Canada (ITAC)) and Michael Turner (vice-president of system strategies for Wesley Clover).

Tessier states “R&D is an integral part of the company’s DNA” and that, while they agree with the concept of moving to a “direct investment model,” Ottawa should remember that “SR&ED has also been a critical piece in helping businesses get off the ground and growing.” Deveau highlights two changes that could “play a role in the competitive abilities of Canadian companies,” which include; “the exclusion of capital expenditures from eligibility” and “the reduction of the credit rate from 20% to 15% for larger R&D based firms. Smaller businesses will continue to be eligible for the 35% tax credit.” Leonard appears more apprehensive of the change and states, “indirect investment is predictable. If you do R&D and it qualifies, you get the credit … with direct investing you will either qualify and get the support or you won’t” Leonard suggests that “because [direct investment is] a finite envelope of funding,” not all who apply will be able to benefit from it and goes on to state “the elimination of the capital expenditure credit could prove particularly detrimental for some businesses … especially in the information and communications technology sector.” Leonard believes the ineligibility of capital expenditure could also dissuade “multi-national R&D companies” from completing their R&D in Canada, which could “ultimately cause [Canada] to lose R&D jobs.”The article concludes with the opinions of Turner who suggests that Ottawa’s shift towards venture capital “is almost all aimed at growth-stage companies trying to spread their wings to international markets” and that this “is a good thing.” Turner however, encourages

The article concludes with the opinions of Turner who suggests that Ottawa’s shift towards venture capital “is almost all aimed at growth-stage companies trying to spread their wings to international markets” and that this “is a good thing.” Turner, however, encourages caution to be taken by Ottawa to implement the changes so as to not “damage certain aspects of Canada’s knowledge sector or lead to huge changes for big companies in capital-intensive industries.”

Globe and Mail

For Canada, it’s crucial to get it right on innovation policy

Barrie McKenna, Globe and Mail.

October 28, 2013. This article reports on an Organization for Economic Co-operation and Development Report (OECD) from 2013  which suggests that multi-national corporations may be taking advantage of the SR&ED tax credit system by accruing tax credits for research in Canada, but moving the profits created by those benefits to different countries in order to reduce their tax rate.

The author represents the OECD report as stating definitely that direct funding is a better way of financing research than tax credits, which is not exactly the case. While McKenna is right that the OECD report declares direct funding to be more effective than previously thought, the report does not exactly encourage all countries to simply abandon their tax credit programs. It contains a number of recommendations for R&D tax credit policy that would encourage use of the programs by smaller corporations and prevent abuse by mulit-nationals.

Ottawa moves to streamline R&D tax-credit program

Barrie McKenna, Globe and Mail.

January 24, 2013. This report discusses some of the large changes made to the SR&ED program in the early 2010s. The specific changes it describes are the web-based tool for claims assessment, the pre-approval process, and changes to the appeals process.

However, this was a time when a number of changes were being announced, and the article comments on the general trend of reduced SR&ED spending and increased scrutiny. SR&ED credits are described as unreliable, with projects treated differently from year to year or depending on location. The article also discusses some of the effects of the policy changes on Canadian businesses. Large companies were especially effected by the 750 billion dollars of anticipated reduction, owing to specific cuts to larger companies specified in changes to the tax code.

Toronto Star

Change is coming- Capital assets, tax credits, and SR&ED

Rona Birenbaum, Guest Contributor, Toronto Star.

April 9, 2013. This article highlights the changes to the SR&ED tax credit that were coming into effect in 2014. Birenbaum states that for “50 of Canada’s fastest growing companies these credits represented 22% of their financing in 2012,” illustrating how SR&ED credits are valued by companies.Birenbaum notes the “most significant” change to the SR&ED program as “the elimination of R&D capital assets as eligible deductions.” Birenbaum quotes Howard Lerner (CA and partner at Richter LLP) as advising clients to acquire and use “any planned capital expenditures … before December 31, 2013.” Birenbaum gives examples of the types of “equipment that often qualified under the program” as equipment used in laboratories or test facilities, food processing (e.g. ovens, freezers, etc.), “Computer equipment used for testing software programs,” and vehicles used to test alternative fuel sources.

Birenbaum notes the “most significant” change to the SR&ED program as “the elimination of R&D capital assets as eligible deductions.” Birenbaum quotes Howard Lerner (CA and partner at Richter LLP) as advising clients to acquire and use “any planned capital expenditures … before December 31, 2013.” Birenbaum gives examples of the types of “equipment that often qualified under the program” as equipment used in laboratories or test facilities, food processing (e.g. ovens, freezers, etc.), “Computer equipment used for testing software programs,” and vehicles used to test alternative fuel sources.The article concludes that “business owners” wishing to claim SR&ED tax credits should seek professional advice from those “knowledgeable in SR&ED.” Birenbaum advises those who own “specialized equipment companies” to utilize their sales force to “capture this window of opportunity” as “after 2013, the

The article concludes that “business owners” wishing to claim SR&ED tax credits should seek professional advice from those “knowledgeable in SR&ED.” Birenbaum advises those who own “specialized equipment companies” to utilize their sales force to “capture this window of opportunity” as “after 2013, the after-tax cost of these products will rise significantly for customers.”


CBC News

Ineffective R&D Funding System Faces Overhaul

Susan Lunn, CBC News.

January 13, 2012. Similar to McKenna’s December 16th, 2011, article, Lunn also approved of the Harper government’s proposed changes to cut the bureaucratic “red tape” that draws a line between innovators and the SR&ED program.

The article included a quote by SREDucation contributor and InGenuity Group CEO Elizabeth Lance. An SR&ED consultant herself, Ms. Lance supported this streamlining approach, saying that “applying to 60 different programs with 60 different sets of regulations just doesn’t make sense.”

Financial Post

Why cut innovation?; Flaherty wrong to slash key research tax credit

Jeffrey G. MacIntosh, Guest Contributor, Financial Post.

July 4, 2012. In this article MacIntosh is critical of Jim Flaherty’s (Finance Minister 2006 – 2014) plans to redirect SR&ED funding to programs such as grant (or “direct”) funding and remove capital and equipment expenditures from qualifying SR&ED criterion, having been recommended by Tom Jenkins’ (Open Text) “blue-ribbon” panel. MacIntosh states these policies have “the potential for harming rather than helping commercialization efforts.”

MacIntosh highlights allowing only labour to qualify for SR&ED leaves “early-stage firms” at risk of falling into the “Valley of Death” which he describes as “the capitalstarved region sandwiched between governmentfinanced basic and applied research, and laterstage private funding by angel investors, [etc.].” MacIntosh notes that early-stage/start-up firms may rely on SR&ED as their “only available source of funding,” and cutting this could ultimately limit the number of start-ups that develop into larger businesses. The article suggests Jenkins’ recommendations come from the view that “much of the $3.5‐billion poured into the federal SR&ED program is wasted since there is no vetting of the quality of firms receiving support” and instead with grants the government can target firms that “it thinks are likely to be winners in the commercialization sweepstakes.” This approach, however, has limitations, as discussed by MacIntosh in that “of every 100 investments made by the most skilled technology investors … one or two end up as “home runs”,” MacIntosh suggests if skilled investors “find it so difficult to pick the right [start-ups]” the government cannot be expected to improve its “track record” by moving to grant programs. MacIntosh describes the “absence of vetting” as a “huge plus” as ultimately the SR&ED tax credit is “considerably less risk” and funding can be acquired in “half the time” compared to grant funding.

The limitations to the five-year “growth benchmark” which was brought into effect as Jenkins’ recommendations suggested that “within five years of incorporation, only 2% of SR&ED recipients grow into large firms still performing research and develop” are also highlighted in the article. MacIntosh states “most experts … agree that it takes between 10 and 15 years to commercialize a new materials technology. Energy technologies may take 30” and suggests it would be problematic if the government were to deny funding to start-ups that had not begun a trajectory for growth after their fifth year as they may still have the potential to develop into successful businesses. MacIntosh is also critical of the move to “restrict the SR&ED to labour costs alone” as this may have adverse effects on the manufacturing industry, which has “a relatively high capital/labour ratio” and states, “a successful innovation economy is critically dependent on a robust manufacturing sector.” MacIntosh concludes that while Canada may have issues in how it brings its innovations to market “eviscerating the SR&ED” is unlikely to help commercialization.

Ernst & Young insight: Changes to SR&ED tax credit impact entrepreneurs and innovation

Denis Lajoie, Guest Contributor, Financial Post.

May 7, 2012. In this article Lajoie highlights the “significant changes” Ottawa planned for the SR&ED program in the Spring 2012 Federal Budget. Lajoie states the changes “most directly affect large corporations” as their potential funding from the SR&ED program is reduced in favour of more funding being directed towards “direct support for business R&D and venture capital funds.” The article also denotes positivity for “smaller entrepreneurial companies” and “small Canadian-controlled private corporations (CCPCs)” as their 35% rate would be maintained, as well as their “requirements for refundability.”

The article also examines various new forms of capital, including “a $400-million commitment to help increase private sector investments in early-stage risk capital” in addition to “$100 million of additional funding will be made to the Business Development Bank of Canada to support venture capital financing.” Lajoie states some of this capital is primarily focused towards “small to medium-sized business” such as the 2014 elimination of capital expenditures from SR&ED calculations. Some of the changes proposed, however, included notable reductions to eligible amounts, including the “prescribed proxy amount,” which was reduced from “65% of each $1 of eligible labour” to “60% in 2013, and 55% after 2013,” and “the inclusion rate” for “sub-contracted R&D” falling from 100% to 80%.

Lajoie concludes that businesses seeking to claim SR&ED tax credits should “do their homework” to learn about the changes and “be aware of the many government-funded options for R&D and innovation.” Ultimately the article encourages businesses to know what tax credits are available, and highlights the importance of understanding “the requirements of a given incentive or funding program” so businesses can apply for funding “in the proper manner and have the necessary information in their files to demonstrate compliance.” 

Worry grants may stifle innovation

Jodi Lai, Financial Post.

March 12, 2012. This article examines the negative aspects of how SR&ED may have been affected by the Tom Jenkins report, Innovation Canada and features the opinion of Julie Bond, president of Bond Consulting, a Toronto-based tax consultancy firm that specializes in SR&ED. Bond believed that the SR&ED program was at risk of coming “to an end,” which would put “the livelihoods of some tax consultants and small businesses at stake.” Bond argues the report’s suggestions, to replace the SR&ED system with one focused towards grants and direct funding, would favour large businesses as they have “entire [Research and Development] departments, because [grants and direct funding initiatives] often fund projects in their idea stages,” whereas small and medium-sized businesses are more likely to conduct R&D “on the shop floor” and their R&D is “often time-sensitive” and so the process of “stop[ping] a project, writ[ing] a business plan, send[ing] it in to a bureaucratic organization” and then “wait[ing] three months for a response” would mean that “by that time, [small or medium-sized businesses have] lost the project.”

Bond argues that small businesses were “not represented on the panel that wrote the Jenkins report” and adds that, although they “provide[d] some missions for the panel” they were “not asked to be on it.” Bond adds that “[small businesses are] absolutely opposed to removing some of the funding toward SR&ED and putting it toward direct grants and subsidies” and concludes that “some people argue that [the SR&ED program] is effective and it creates jobs, but it’s hard to see,” however, Bond highlights that if the SR&ED program were to be abandoned, “[Canada would] quickly see the results, which is foreign companies moving out and small and medium-sized business not innovating.”

Francis Moran & Associates

SR&ED and the law of unintended consequences

Francis Moran, Francis Moran & Associates.

December 6, 2012. In this article, Moran highlights the disconnect between research and development (R&D) and marketing activities in a company, and the problems that may arise. Moran states, “the temptation is very real at almost every company to design a new product in response to a single customer’s description of what they’d really like to see” and, Moran argues, the SR&ED program allows this as “the R&D department can […] build that product with 65-cent dollars.” This leads to what seems like profitable R&D work, as after the SR&ED tax credit has been claimed the company has not lost money; however, it may not translate to broader sales and a successful product: “CEOs can do the simple arithmetic of subtracting the annual SR&ED cheque from revenues and watch their lovely black numbers turn horribly red.”

The article emphasizes that marketers “need to be able to demonstrate that the marketing of a strategically conceived product — one that enjoyed a proper customer needs analysis and business case before it went into development — was successful in [Return On Investment] terms.” This article highlights one issue that many critics have regarding the SR&ED program; namely, that the program appears to generate less income for Canada than is invested (“$3.5-billion”). The article concludes with what could be a solution; marketing and R&D teams working together to “show how the most profitable of outcomes can be achieved when effective, market-driven product strategies are married to an R&D process that applies generous-but-still-not-unlimited government incentives only to the most promising projects.”

Globe and Mail

One Tax Credit Not to be Ignored

Chris Griffiths, guest contributor, Globe and Mail.

November 27, 2012. In this rare positive article from the Globe and Mail about the SR&ED program, Chris Griffiths (a guest author) describes the benefits he has incurred from the tax credit. However, at the same time, Griffiths arguably understates the complexity of the SR&ED program, stating that:

Any small business in any industry can qualify, as long as the work you are doing, and the expenses related to that work, are spent trying to advance products or processes in ways that have unpredictable outcomes.

While he describes his personal application, which did qualify for SR&ED, his simplified definition for eligible activities casts a bit too large a net. As much as it is important not to be swayed by journalism that describes the SR&ED program as a catastrophic boondoggle rife with fraud, it is also important not to be cavalier when applying for the program.

R&D tax credit changes under fire

Barrie McKenna, Globe and Mail. 

November 01, 2012. Chronicling the effect of changes to the SR&ED program in 2012, McKenna speaks to members of the Canadian business community. Morgan Elliot, director of government relations at Research In Motion (RIM, now BlackBerry Limited) argues that the changes to the SR&ED program will have a negative effect on Canadian research, suggesting that in addition to the direct decrease of a total of $750-million dollars in tax credits, the changes might influence Canadian companies to spend less on research and development.

This article points to a report by the Canadian Manufacturers and Exporters association (CME), stating that the changes to policy, with reductions in SR&ED spending combined with increased direct funding, will have different effects on Canadian companies based on size. Smaller companies stand to gain potentially more funding through grants, with less funds being directed towards large corporations due to changes in the SR&ED tax credit rate and eligible expenses.

Innovation needed on a flawed R&D incentive scheme

Barrie McKenna, Globe and Mail.

March 25, 2012. This article examines what McKenna refers to as the “save SR&ED” lobby and its response to the recommendations for SR&ED set out in Tom Jenkins’ Innovation Canada report.

McKenna suggests that venture capitalists, SR&ED consultants and “various sectors of manufacturing” are part of the “save SR&ED” lobby, which have “lobbied furiously” to “make the [SR&ED] program even more generous than it is now” and “delay any changes, pending further consultation.” This comes as a response to Jenkins’ recommendations to “limit the [SR&ED] credits to labour costs, reduce the generous [35%] refundable credit for small Canadian-controlled private companies, and then plow the savings back into more strategic and later-stage financing.”

The article quotes John Ruffolo (chief executive of OMERS Ventures) in opposing these recommendations as he states “we should look at ideas to deliver [the SR&ED program] more efficiently and eliminate any abuse, but let’s not throw out the baby with the bath water.” Mike Brown (chairman of Chrysalix Energy Venture Capital) is also quoted as calling “SR&ED the “bedrock” of venture capital” and states that it enables “small innovative companies to survive long enough to attract later-stage investment.” Ultimately Ruffolo and Brown defend the SR&ED program; they admit that the program may need “tighter rules,” however they oppose the recommendations set out by Jenkins’ report.

The article concludes that “abuse is … an acknowledged problem;” however, the degree of the abuse is not confirmed, nor compared to other abuses in the current tax system such as tax sheltering schemes, such the estimated $6 to 7.8 billion in tax revenues lost to offshore tax evasion every year 1 McKenna states that there is an “inherent design flaw” in the SR&ED program and suggests that due to the generous (“35% cash rebate on the first $3-million of eligible R&D expenses”) for small Canadian-controlled companies, the program may have a “disincentive to grow” and may “split R&D activity between multiple smaller, inefficient entities.”

Tories seek to spur corporate R&D spending with new budget

Barrie McKenna, Globe and Mail. 

March 23, 2012. This article follows the Minister of State for Science and Technology, Gary Goodyear, as he travels the country preparing for the release of the new Conservative budget. It describes the changing priorities of the government with respect to research funding, with cuts to overall spending in the SR&ED program, and increases to direct funding programs.

Goodyear argues that the overall effect of these changes will be to encourage not only R&D, but the commercialization of that R&D. The general direction off all the changes involve more top-down control over what is researched, and less pure research – In government labs, this means scientific research is more informed by industry priorities, and in industry, research is more informed by government direct grants.

A glaring need to determine what’s legitimate R&D

Barrie McKenna, Globe and Mail. 

February 19, 2012. Here, McKenna addresses the Federal Taxpayers’ Ombudsman Paul Dubé’s report, released in February 2011. McKenna argues that Dubé’s report does not show the whole picture regarding his investigation of the SR&ED program. He states that because the Harper government is uninterested in the results of that particular report, preferring to base their budget decisions on the results of the Jenkin’s report, released in 2011.

The Jenkins report called for a change in strategy from indirect to direct funding methods, while Dubé’s report is more concerned with the way the CRA establishes scientific eligibility, as well as regulation of claims preparers. McKenna declares his suspicions that a truncated version of the Dubé report was released to the public for political reasons – the Conservatives already had planned to follow the recommendations of the Jenkins report. McKenna worries that the end result will be overall reduced R&D spending, without actually improving the SR&ED tax credit application process.

Can Ottawa spark innovation? It hasn’t yet

Jeffrey Simpson, Globe and Mail.

February 1, 2012. The article examines Canada’s stagnation in productivity and innovation (as “innovation lies at the core of enhanced productivity”) despite its generous spending on research and development programs. Simpson focuses specifically on the effect an aging population has on the need for those of working age in the country to increase their productivity.

Simpson continues to suggest that Canadian politicians have trialled many “textbook” suggestions to enhance productivity; “intelligent fiscal policies, lowered taxes, tried to reduce regulations, entered into liberalized trade deals, privatized Crown corporations, invested in research and skills training.” However, none of these previous efforts have succeeded in increasing productivity. Simpson also mentions Jenkins’ report and the suggestions from it that the Harper government planned to instigate (such as the creation of an “Innovation Council to try to co-ordinate programs better”, modifying and reducing the SR&ED program to spend “some funds on direct grants” and a “shake-up of The National Research Council”).

The article concludes that “the Harper government, like its predecessors, is sufficiently dismayed by lagging productivity that it is willing to shuffle programs around and create new structures” however doubts that the programs are the reason for the reduction in productivity as they have been “among the most generous in the world” and instead suggests that potentially, “Canada has industries that just don’t do much research and development” and, therefore, the opportunities for innovation and enhanced productivity are limited.

Stephen Harper’s innovation challenge: Canada falls behind its rivals in R&D: Biotech sector backs the idea of flow-through shares

Barrie McKenna, Globe and Mail.

January 29, 2012. This article was the second published, in as many days, which focused on Stephen Harper’s (Canadian Prime Minister 2006 – 2015) response to the findings from Tom Jenkins’ report Innovation Canada at the World Economic Forum in Davos, Switzerland.

McKenna quotes Harper as being “not happy” in regards to the “roughly $7-billion-a-year” spent on research and development (R&D). McKenna goes on to state that Harper would introduce the recommendations from Jenkins’ report, including “revamping the $3.5-billion-a-year SR&ED program.” The article outlines other key points from the report that included recommendations to “limit the credit to labour costs and reduce the generous refundable credits available for smaller Canadian-owned companies.” The author states these are “sensible suggestions” however, “if the money is going to be diverted from SR&ED, to where?” and speculates whether some companies or industries will be favoured over others.

McKenna goes on to use the biotech industry’s introduction of “flow-through shares” (explained by a partner in corporate finance at Norton Rose, as shares that “allow companies to transfer tax deductions to investors … to lower their personal or corporate tax”) to help companies get to commercialization when they need capital but have few sources of funding. Flow-through shares could act as a solution to bridge what the Canadian Advanced Technology Alliance deems a “commercialization,” opposed to an “innovation” gap in Canada.

Harper signals Canada’s looming R&D revamp

Barrie McKenna, Globe and Mail.

January 27, 2012. The article highlights, then Prime Minister, Stephen Harper’s statements made in Davos, Switzerland at the World Economic Forum regarding Canada’s SR&ED program. McKenna states Harper “acknowledged the country isn’t getting good value from the money it spends pushing Canadian companies to be more innovative.” McKenna argues that the SR&ED program be replaced by a simpler, smaller fund focused on “business innovation” based on the findings from a report headed by Tom Jenkins, chairman of Open Text Corp. McKenna continues, “companies that use the [SR&ED] program have long complained that [it] is too bureaucratic, unpredictable and bears no relation to how company’s [sic] actually conduct R&D.”

The article concludes with further recommendations from the report, including creating a single federal minister and agency to control innovation spending, making programs “simpler, transparent and accountable,” shifting from “tax breaks to direct funding” and increasing funding to “‘late-stage’ venture capital.”

Toronto Star

Sweeping changes proposed for R&D programs

Dana Flavelle, Toronto Star.

March 30, 2012. This article discusses the changes proposed by Tom Jenkins’ report Innovation Canada. In the article, Jim Flaherty (Finance Minister 2006 – 2014) states, “the government needs to over haul the way it promotes private sector productivity” and that programs funding research and development (R&D) are “necessary to help sustain a modern, competitive economy – they encourage innovation.”

Flaherty admits, “the key is to leverage private sector investment in research and development” however, “in spite of our efforts so far, Canada is not keeping up with other advanced economies on this crucial front.” Flavelle outlines the changes that Ottawa are to propose to the SR&ED program, including: a reduction in funding of “$1.3 billion over the next five years,” where instead it will hand out “$1.1 billion in direct grants to businesses involved in R&D” and will “plow $500 million into venture capital funds to help start-ups convert new ideas into commercial products” and also “double spending on R&D by small- and medium-sized business next year to $220 million under its Industrial Research Assistance program.”

Flavelle concludes that the government intended to make the changes to “make the federal R&D program less complex and more efficient,” however, notes that business groups disagree with the proposed changes as they “fear it will give Ottawa more control over who gets to benefit from the program.” In the article, Dan Kelly (national vice-president with the Canadian Federation on Independent Business) is quoted, stating his concern as “Ottawa has a terrible track record of picking winners.”


Financial Post

Handbacks, not handouts

Neil Seeman, Guest Contributor, Financial Post.

October 17, 2011. This article highlights that the Scientific Research and Experimental Development (SR&ED) program is preferable to a “handout” culture of government grants, loans and targeted funding. Seeman believes that handouts “silence [ ] critics” and that truly innovative people, such as entrepreneurs and CEOs do not criticize the bureaucratic nature of applying for grants, loans, and targeted funding as these CEOs and entrepreneurs “might be applying for one of those handouts in the future.”

Seeman goes on to say that “handouts” may even “destroy companies” due to their “tendency to distract businesses toward meticulous compliance with irrelevant government policy and away from the goal of satisfying the customer.” Ultimately, Seeman concludes that even experienced venture capitalists (VCs) “only have a 10% chance of choosing the next big winner.” The article highlights that potentially “99%” of government money would be lost to targeted grants and loans due to “poorer picks than vested experienced business VC investors acknowledge, and with increased bureaucratic overhead.” By contrast, Seeman prefers the SR&ED program as it ensures “the company must first pay out the money, spending it based on its business priorities. Only later are the expenditures reviewed by the government to see what portion qualifies as research and therefore as eligible for the rebate.” Thus the SR&ED program is preferable to targeted grants and loans as the companies spend the money first, and the government refunds based on the work that is eligible.

Globe and Mail

R&D tax scheme too rich, government panel finds: Report

Barrie McKenna, Globe and Mail.

2011. The article argues that despite Canada’s SR&ED program being, “among the most generous tax breaks in the world,” Canada was falling behind rival countries, as the business spending on R&D was stagnant. McKenna argues Ottawa needed to “overhaul its flag-ship research and development programme because it spends too much money and fails to show any increase in innovation.”

The article features a report outlining that the government spent nearly $7-Billion on R&D but did not know “if that money [was] making Canadian companies any more innovative.” McKenna argues that there were, “at least 60 programs run by 17 different agencies,” and that these programs should be rationalized and put under the control of a single “innovation council.”

Harper Hints at R&D Tax Break Overhaul

Barrie McKenna, Globe and Mail.

December 16, 2011. Two months after his previous article, McKenna applauded the Conservative Party’s pledge to improve the SR&ED tax incentive by streamlining the claiming process, moving toward a more direct funding approach, and limiting eligible expenses to R&D labour costs.

These proposed changes would effectively signal the demise of the SR&ED consultancy industry, a prospect McKenna was seemingly in favour of–he restated once again that large chunks of return amounts were “grabbed” by consultants, and away from R&D activities.

A Chance to Fix Our Broken R&D Model

Barrie McKenna, Globe and Mail

October 16, 2011. Alongside his interview with expert panel reviewer Tom Jenkins, McKenna offered a positive response to the so-called Jenkins Report, a.k.a. Innovation Canada’s Review of Federal Support to Research and Development. McKenna called the report a “long-overdue shift from talking about Canada’s innovation deficiencies, to actually doing something about them.”

The Globe and Mail article also provided an overview of criticisms of the program made in the report, including: SR&ED’s status as “R&D democracy over R&D meritocracy“; Canada’s failure to turn knowledge into innovation or commercialize its products; suspicious R&D claims; inconsistent/unpredictable rulings, and diverging an inordinate amount of SR&ED refunds to consultant fees.

Wait for government grants slows hiring

Diane Peters, Globe and Mail.

July 6, 2011. The article examines the difficulties a start-up mobile app company (Polar Mobile) faced trying to secure enough staff to deal with projects due to the delay in receiving government funding. Peters states, “Staffing is so tight that Mr Gupta [Polar Mobile’s CEO] turned down a contract to avoid overwhelming his team.”

The article continues with three experts, Rod McNaughton (Director of Waterloo’s Conrad Business Entrepreneurship and Technology Centre), David Wilton (Director of small business banking, Bank of Nova Scotia, Toronto) and Steve Smith (Co-founder of CakeMail, Montreal). Each expert gives advice on how Polar Mobile could, “better bridge the cash-flow gap so [Gupta] can do the hiring he needs while he waits on government grants.”

The experts offer various pieces of advice, including: seeking loans from “large corporate customers” or outsourcing to India or Africa (McNaughton), seeking a “line of credit” from the bank or using credit cards to accept payments (Wilton), and focussing on hiring, “software engineers … over admin and marketing” or obtaining SR&ED tax credits (Smith).

Cash in on government help to build a better mouse trap

Brian Cookson, Guest Contributor, Globe and Mail.

May 2, 2011. In this article, Cookson gives tips to companies wishing to claim SR&ED tax credits and highlights how helpful and knowledgeable consultants in this area can be. Cookson includes eight pieces of advice, the first; that many companies often don’t identify “SR&ED projects at the right levels for funding,” or fail “to include eligible activities and costs” and often don’t recognize “which projects qualify for the program.” The second tip focuses on not being “greedy” in an SR&ED claim and Cookson encourages claimants if they “develop new products and processes each year” to “file a SR&ED claim each year.” The third to the seventh, importantly, encourage keeping relevant and recent, “contemporaneous,” documentation, remind claimants that claims can be back-dated up to three years. They also remind claimants “there is no need to get approval to make an SR&ED claim before beginning that new initiative” and, most importantly, with SR&ED claims, “if you miss the deadline, you get nothing.”

The eighth, and final, piece of advice highlights the CRA’s careful administration of the SR&ED program, and therefore the likelihood of having a claim reviewed. Cookson states, “about one-third of all claims are audited each year, and you can expect to be the subject of one of these in-depth evaluations at least every five or six years.” Ultimately the advice is useful and Cookson is positive towards the SR&ED program – highlighting that the CRA audit it carefully because, as an “expensive” program, their priority is to keep it “honest.”

Flawed R&D Scheme Costs Taxpayers Billions

Barrie McKenna, Globe and Mail.

March 11, 2011. In this article, McKenna echoed observations made in meetings between the CRA and SR&ED consultants and accountants–namely, that a wave of questionable claims had gone through due to “hazy rules” in the CRA that failed to adequately define legitimate R&D activities.

Overall, McKenna painted a bleak, crime-ridden picture of SR&ED consultancy, referring to it as an “exploding cottage industry” that an unnamed CRA source had described as the industry’s “dirty secret”. Additionally, the article condemned SR&ED as an expensive program paid for by taxpayers without any tangible R&D outputs.

Abuse of R&D tax credit a case of the same old, same old

Barrie McKenna, Globe and Mail.

February 7, 2011. The article investigates the potential of bogus claims being made for SR&ED tax credits, McKenna states, “every dollar squandered is money that isn’t available for legitimate R&D at a time when Canada faces unprecedented global competitive threats.”

McKenna argues that the SR&ED program “in theory” should help companies “develop the kind of products that … drive the economy of the future,” however, he discusses the findings from a town hall meeting with tax consultants in Burlington, Ont. where he states,” CRA officials from across the country painted a disturbing picture of a program gone badly astray” describing a “surge of bogus and unsubstantiated claims.” Andy Meredith, a then-CRA spokesperson, is quoted in the article as stating, “while the ‘majority’ of SR&ED claims are legitimate,” the CRA witnessed “’a growing trend’ toward a deteriorating ‘quality’ of claims.”

The article concludes that the government “knows there are problems.” Ottawa created an expert panel (headed by Tom Jenkins, executive chairman of Open Text Corp) to review its various R&D programmes, including SR&ED tax credits, and the Federal Taxpayers Ombudsman, then Paul Dubé, was investigating whether the CRA was ” administering the SRED program fairly” however, this report was delayed.

Dubious Claims Diminish R&D Tax Credit

Barrie McKenna, Globe and Mail.

February 6th, 2011. In the first of what was to be a series of 2011 articles lambasting the SR&ED program for being ineffective and prone to abuse, Barrie McKenna visits a town hall meeting in Burlington, ON, between CRA officials and tax consultants.

McKenna’s reporting gives the efforts to improve the SR&ED program an edge of conspiracy: “The awkward truth is that the government has known for years that SRED is leaky.” His subsequent reporting on this issue would make this point repeatedly, depicting SR&ED as a program rife with corruption and abuse, presided over by a hopelessly incompetent and overwhelmed CRA.


A Grant Dump That Smothers Innovation

Andrew Coyne, McLeans.

November 3, 2011. In this article, Coyne argues that the money spent in “support for innovation” has been uneconomical and has, potentially, suppressed innovation in Canada. Coyne notes that from “1985 through 2006, Canada’s productivity growth ranked 15th out of 18 countries” even though Canada is thought to have “the most generous systems of R&D support in the world, behind only Spain and France.”

Coyne admits that “there is a tendency to treat innovation as if it were a piece of industrial machinery in itself: you inject a certain amount of government funding at one end, you get a certain amount of R&D at the other,” however, he continues that while there may be a correlation between the R&D funding provided by the government and the amount spent on R&D by companies, “there is very little connection between aggregate spending on R&D and innovation.” Coyne uses a report by the Council of Canadian Academies to define what he believes innovation should mean as, “new or better ways of doing valued things” and suggests that businesses can be allowed and “forced” to be more innovative.

The article concludes with options on how to “force” and allow businesses to innovate, including recommendations from a report by the C. D. Howe Institute which suggested “instead of stuffing firms with subsidies to innovate, governments would do better simply to refrain from confiscating so much of the returns when they do” and that competition will ultimately “force” businesses to innovate through “instilling fear” in the owners that if they don’t innovate, someone else will.


Globe and Mail

Canada’s sorry state of innovation

Barrie McKenna and Jeremy Torobin, Globe and Mail.

October 8, 2010. This article, like a few others in this list, tries to address broadly the problems facing research and development in Canada. Arguing that Canada’s patent rate (1.36% of global patents, compared to America’s 30%), less than a third of the per capita patent rate of the United States, is an indicator of an overall climate full of barriers to innovation.

In addition to discussing university intellectual property (IP) policies, lack of large Canadian tech companies, and the collapse of the tech boom, McKenna points to SR&ED as an area where Canada can improve its innovation funding. This article talks specifically about lack of confidence in the result of a SR&ED application, and the perceived complexity of the program, two main factors which suppress R&D spending by Canadian companies.

National Post

A tax credit that’s often overlooked; A wide variety of activities, sectors may qualify

Bob Waterworth, (Guest Contributor), National Post.

August 24, 2010. This article investigates eligible activities and some of the information needed to make a claim for SR&ED tax credits. Waterworth states, “A wide variety of activities in different types of businesses may qualify … I’ve seen eligible R&D in industries ranging from food and consumer products to high-tech information, communication and video games, to auto parts and engineering.”

Waterworth argues the benefits of the SR&ED program in allowing companies to “invest in further research” with local universities which benefit “both the company and a university.” The article goes further to discuss what documents should be kept when looking to file an SR&ED claim, including the time “employees spend working on R&D projects” and the forms that should be filed.

Waterworth concludes, “it can definitely be worthwhile for your small business to claim any R&D tax credits it is eligible for because claiming these credits can reduce the company’s tax burden and give its cash flow a significant boost.”


Toronto Star

Researching and developing ways to save Canada’s R&D

David Olive, The Star.

May 17, 2009. Olive examines how Canada can retain its research talent through its research and development (R&D) tax credit program, SR&ED. The article uses the move of a top HIV/AIDS researcher to the U.S. to highlight the importance of maintaining expenditure in R&D.

Olive states that the Harper government was “vilified for cutting $148 million … from three agencies that fund basic research at Canadian universities,” and that these institutions had required essential funding for years to “upgrade labs and provide researchers with state-of-the-art equipment”. Olive argues that neither “pure” (no solution sought) nor “applied” (specific solution sought) research should be under-funded. Olive states pure, “curiosity-driven” research, “lead to the world-changing “accidental” discoveries of … Isaac Newton to Albert Einstein.”

The article concludes that business collaboration with research institutions ranks “among the lowest of 26 nations,” yet Canada should encourage more university-business collaboration, so it does not depend on foreign firms to bring inventions from Canadian research to market.


Globe and Mail

Jim Flaherty’s R&D thoughts

Unknown Author, Opinion, Globe and Mail

January 25, 2008. The article discusses how then Finance Minister, Jim Flaherty, could boost industrial research and development (R&D) in the wake of the looming recession. The author argues that, “it is only now, as the economy slows, that Ottawa is assembling a real strategy for R&D and scientific innovation, which could be pivotal for economic growth.”

The article also compares how the U.S. handled the fall in the economy by providing, “tax rebates of up to $600 for individuals,” to encourage spending on goods and services, to how Canada might negate the effect any recession would have on the economy. The author states how the Bank of Canada, “radically revised its estimates for real GDP growth,” from 2% to 0.6%, and depended on, “domestic demand, high commodity prices, real-income growth and further cuts in its key [interest] rate.”

The article concludes that, “support for industrial research could lead to better products and services, which would appeal to export markets,” and that “Ottawa’s help” would be integral to bringing these products or services to market. Interestingly, no mention is made regarding the current support of industrial research through the SR&ED program.


Globe and Mail

Tech Coalition Warns Takeover Spree is Nigh

Steven Chase, Globe and Mail.

February 6, 2007. Chase describes a dangerous situation for Canadian companies created when they have a large amount of SR&ED income tax credits (ITCs), but little income. Unable to recoup the accumulated credits without income to apply them against, the companies are concerned that their ITCs make them attractive targets for takeovers by another company, more able to make use of the credits.

As a proposed solution to this problem, several business leaders called upon the Canada Revenue Agency to allow them to apply their accumulated ITCs against other levies owing to the government. They would be able to reduce their accumulated about by applying it to, for example, employment insurance payments.


Globe and Mail

R&D tax breaks are not wasteful – they’re essential

Earl Viner, Opinion, Globe and Mail.

2000. Viner argues that “it’s worrisome that … SR&ED has come under fire from the Auditor-General and a House of Commons standing committee on public accounts,” as criticism could lead to the program being reduced or eliminated and left “to the private sector.” The author goes on to state that, “many businesses entitled to tax benefits … fail to take full advantage because the principal elements of the program are extremely technical and not readily understood”. Viner argues that, “despite some bad press,” incentives (like the SR&ED program) “create better standards of living for [a country’s] citizens”, give corporations reason to move to Canada and uses the DaimlerChrysler research operation opening “a large research operation on [the Canadian] side of the Detroit River” as an example.

Firms may get $2 billion tax windfall

Shaun McCarthy, Globe and Mail.

April 12, 2000. McCarthy describes an (at the time) ongoing legal challenge to the Canada Revenue Agency (CRA) policy regarding the ability of banks and telecoms to accept SR&ED credits. After having been disallowed from claiming SR&ED tax credits, a number of large banks and telecoms were taking the Canada Revenue Agency to court for an amount somewhere between $400 million and $2 billion.

The article uses the legal threat of massive payouts to criticize the administration of the SR&ED program in more general terms, accusing the CRA of politically manipulating SR&ED applications against the prior assessments by junior auditors.  It also discusses a contemporaneous Auditor-General report which criticized the CRA for leaving the SR&ED program vulnerable to legal challenge.

National Post

The boondoggle continues

Unknown Author, National Post.

April 12, 2000. This article compares the Scientific Research and Experimental Development (SR&ED) program in relation to the “Human Resources Development Canada job grants scandal,” which saw potentially more than $1 billion-worth of government spending in job grants go unaccounted for. 2 The author relates the SR&ED program to the HRDC “scandal” as “different departments, same old problems” and suggests that because the SR&ED program is “little known” that it reflects the same level of potential mismanagement, such as “bureaucratic foul-ups, questionable criteria and negligible gain to Canadians as a whole” as the HRDC scheme.

The author goes on to state that “the criteria for awarding the tax credit have proved to be quite extensive” and so, to suggest the CRA would introduce more criterion and not plan on auditing the submissions to ensure the criterion was met suggests a strongly negative bias from the author. The author continues to suggest; “some proposals were submitted multiple times until they received favourable reviews. One particular project struck out three times before finding a more agreeable committee. Occasionally head office bureaucrats have over-ruled the findings of regional offices and authorized tax credits previously rejected.”* The author suggests that, like the HRDC scheme, “billions of dollars in [SR&ED] were handed out in secret, using questionable and surprisingly elastic criteria, with little supervision and to very little useful (i.e., non-political) purpose.” The author, however, does not acknowledge that the HRDC program played a very different role to that of the SR&ED program. HRDC sought to provide government jobs in existing sectors, whereas SR&ED seeks to provide companies with the means to continue to develop new knowledge and information (even if their experimentation is not always successful,) which has the potential to create new sectors that may ultimately prove more valuable to the economy.


*A claim being reviewed several times is not a common occurrence, though does happen and is often taken to tax court (as can be seen in the Tax Court of Canada Rulings section of this website). 


Globe and Mail

Ottawa speeds up R&D claims

Barrie McKenna, Globe and Mail.

1997. This article highlights the role of Revenue Canada (RC) (now Canada Revenue Agency (CRA)) in speeding up the SR&ED claim process from two years to four months and reassigning, “160 of its bureaucrats involved in reviewing claims in order to develop their specialized expertise in industries such as high-technology.”

At the time of writing, RC had discovered, “compliance costs for small and mid-sized business [were] 15-times higher than average.” The review of the R&D processing procedures began in 1994 when RC was, “swamped with more than 15,000 back claims,” which included claims totalling $300m from Canada’s “Big Six” banks.


Globe and Mail

R&D tax credit a fiasco waiting to happen

Terrence Corcoran, Globe and Mail.

1994. This article highlights that, at the time of writing, chartered banks were making claims that “could exceed $300-million” under the SR&ED program. Corcoran argues that the SR&ED program is one of the, “most generous R&D corporate giveaways in the world,” however, that it is unclear “what economic returns are Canadians getting from the $7-billion Ottawa now spends supporting private and public research.” (At the time of writing this figure was related to the “entire federal support for science, technology and research” as the amount spent on SR&ED was $1-billion.)

The author believes the “economic definition” of research and development (R&D) is “vague and conceptual,” and highlights that Deloitte and Touche “churned out newsletters urging their clients to board the bandwagon.” Corcoran suggests that the SR&ED program is inherently flawed and has led to a “succession of funding disasters” and goes on to state, “the use of tax credits to stimulate R&D was always fraught with risk of abuse and confusion.” The author does not address that the Canadian banking system is one of the more advanced banking systems in the world, nor substantiate the hype that this would be an area that is higher-risk of abuse and confusion than other parts of the Income Tax Act.

Misuse threatens R&D, firms say

Alan Freeman, Barrie McKenna, Globe and Mail.

December 17, 1994. In a follow up to the below article, “Banks ask millions in R&D credits,” McKenna discusses the reaction to the raft of bank-related SR&ED applications from the perspective of Canadian high-tech firms. These firms, who had been collecting SR&ED tax credits regularly for years, were very concerned about the effects of a backlash against the program due to the recent bank applications. This article highlights some of the tensions that have driven debate about the SR&ED program for years. At the same time as seeking to create a program that supports innovation, the government must apply their rules fairly, which may mean distributing income tax credits to companies that some say are not eligible.

This article also addresses the ongoing debate regarding the value of indirect funding (tax credits) compared to that of direct funding, through targeted grants. They interview a professor who, at the same time as arguing that tax credits are ineffective for supporting innovation, argues that the government also has a bad history with respect to choosing direct funding recipients.

Ottawa powerless as firms told how to reap R&D tax credits

Alan Freeman, Barrie McKenna, Globe and Mail.

December 16, 1994. This article explores the business practices of SR&ED consultants, which according to Freeman and McKenna, veer uncomfortably into the corrupt. They interview a SR&ED consultant who references “trial-and-error, effectively,” which would not pass muster with today’s CRA. While its true that there was, and is, evidence, of unscrupulous practices by some SR&ED consultants, some of the evidence–similar to the evidence he presents in the article “You don’t need a laboratory to do R&D,” seems to rely on the authors’ own, superficial, ideal of what science is.

For instance, the authors cite a case of a restaurant developing strawberry-flavoured beer as being evidence of misplacement of SR&ED funds, but it seems a little bit odd that the food-related research is somehow lesser science than other kinds of research. Without information about the process in particular, it’s impossible to say whether the authors are right or wrong to criticize this instance, but the sheer fact that the product being developed is a beer flavour is poor evidence that it is not SR&ED.

Banks ask millions in R&D credits

Alan Freeman, Barrie McKenna, Globe and Mail.

December 15, 1994. This article describes the sudden discovery by a number of Canadian banks that their computer research over the course of the past eight years was eligible for unclaimed SR&ED credits (it is no longer possible to claim SR&ED credits for research performed so far in the past). As a result, all of these institutions decided to apply a $300 million in SR&ED credits at the same time. Since the sum of money is so large, it is understandable that this would cause a bit of consternation in the press.

This article forecasts some of the debates that would be to come over the SR&ED program, with the authors addressing technical eligibility–they describe research into “developing an on-line system to validate credit information” as “an everyday banking activity.”  The banks counter by declaring their work to be valid research, arguing that if it weren’t valid, they would not be receiving the tax credits. Ultimately, in response to this controversy, Paul Martin would step in to declare that banks were ineligible for information technology tax credits.

You don’t need a laboratory to do R&D

Alan Freeman, Barrie McKenna, Globe and Mail.

December 15, 1994. In this article, Freeman and McKenna write:

[W]hen it comes to claiming an R&D tac credit from the federal government, the work doesn’t have to be done in a laboratory or by a scientist seeking a Nobel Prize. The work can be done in an office, or on the floor of a manufacturing plant, and can involve not just inventions but also improvements on existing products and processes.

The rest of the article goes into detail about why this is a wasteful state of affairs. It seems that the authors have very rigid ideas about what research and development is, and are offended by the idea that a company might make use of research and development tax credits that does not have a laboratory. Others may argue that one of the strengths of the SR&ED program is that it is not confined to a laboratory space, and that it sets out broad criteria encompassing the variety of ways that R&D take place across a variety of industries and contexts.


Toronto Star

Spending on research is money well spent – No other investment returns as certainly as does that in R&D

Howard Dickson, Guest Contributor, Toronto Star.

December 15, 1993. In this article Dickson defends and encourages more spending on research and development (R&D), and highlights the return received from investment in R&D. Dickson states, “no other investment returns as certainly as does R&D” and quotes an Economic Council of Canada survey commissioned in 1992 that “highlights just how powerful R&D can be as an investment. Results indicate a 10-to-40 per cent rate of return for domestic R&D […] The same survey estimated the social rate of return of R&D, that is the economic spillover into industrial and service sectors, at 50 to 100 per cent in excess of the initial rates of return.” This highlighted that R&D in Canada would generate 10 to 40 cents, and the “social” return on R&D investment would be 50 cents, for every one dollar spent.

Dickson emphasizes that “Canada must quickly shift from a limited, resource-based economy to an unlimited ‘new’ economy founded on intellectual power” and is sceptical of the government’s commitment due to it’s poor history in funding initiatives to encourage R&D. Dickson states, “Canada has not invested wisely over the past decade” and that at the time, Canada’s spending (as a percentage of Gross Domestic Product) on R&D was, on “average over the last decade […] approximately 1.41 per cent […] at the bottom of G-7 countries, well behind the next highest, the Netherlands at 2.11 per cent, and far behind Japan, which leads with 2.87 per cent.”* Dickson, however, is also critical of the lack of business-financed R&D and highlights that the “40.9 per cent” of R&D expenditure financed by industry in Canada is “the poorest showing of all G-7 countries” and this chronic under-funding from both government and industry led to a “severe warning” from the “Paris- based Organization for Economic Co-operation and Development (OECD),” which stated if Canada “ever expect[s] to participate in the global economy [Canada has] to increase [its] investment in R&D and in technology.”


*It is important to note that this figure has not increased dramatically – in 2014 Canada spent 1.61 per cent of its GDP on R&D 3, over 20 years after this article was published.


Vancouver Sun

Tax credit changes to plug $230 million into research

David Smith, Vancouver Sun.

November 21, 1992. This article discusses the changes to Canada’s research and development (R&D) program regarding overheads and capital expenditures. Smith quotes Joanna Hausch, senior manager in tax at Deloitte & Touche in Vancouver who stated the changes were “very positive,” however Hausch stated the government had “added some administrative complexity into the new rules.”

This “complexity” related to the introduction of the “proxy amount” that was introduced and proposed ITCs could be earned on “65 per cent of direct salaries and wages, excluding benefits” and on capital assets used “more than 50 per cent and less than 90 per cent for research.” This contrasted with the existing system at the time the article was written which allowed companies to claim for capital equipment used more than “90 per cent” of the time. This meant that shared-use equipment that was used for both research activities and non-R&D activities would now come under scrutiny and would “effect everyone who is doing R&D” as they would have to split the time equipment was used for both R&D and non-R&D activities.


Toronto Star

Canada skimps on R&D spending

David Crane, Toronto Star.

March 4, 1990. In this article, Crane is critical of sustained governmental cuts to scientific and technological research and development (R&D) spending. Crane examines the financial support offered to Canadian companies, by the federal government, to conduct R&D work. The article highlights that Finance Minister Michael Wilson “cut science and technology support by about $40 million” and that during the course of Wilson’s time in tenure “since 1984-1985” Crane stated, “total federal spending on research and development, including support for universities and industry, has grown barely 1 per cent, after inflation.” The article also highlights business spending on R&D and references a Conference Board of Canada survey that stated, “after catch-up gains of 10 per cent in 1988 and 7.8 per cent in 1989, corporations plan below-inflation growth in spending through to 1994.” The survey stated that there was a difficulty for businesses to find “skilled R&D engineers and scientists,” which Crane highlights as something that is hindered directly by cuts to universities, as these are the “training ground for Canada’s scientists and engineers.”

The article discusses an appearance made by John Roth (executive vice-president of telecommunications manufacturer) before a House of Commons committee in which Roth emphasized a “huge handicap facing Canadian high-tech companies because the cost of capital is so high while R&D support is too low.” Roth continues that a company in Canada could borrow $275 million to create a $1 billion asset, whereas in the U.S. “you could afford to borrow $400 million […] And in Japan, with its low interest rates, ‘you could borrow $675 million’,” which led to Canadian businesses taking less risks and being less “aggressive” with their R&D endeavours and therefore were less likely to develop new products. Crane then highlights that Wilson “slashed the value of the incentive by restricting it to 75 per cent of the tax otherwise payable” and had originally wanted to limit the tax credit ” to just 50 per cent of the tax otherwise payable.” Roth argued the tax credit was “‘useless for small, start-up companies and to companies losing money” and comes out in support of direct government funding stating, “AT&T had a $30 million gallium arsenide facility built for them by a DARPA [U.S. Department of Defense Advanced Research Projects Agency] contract. We had to build our own $30 million facility – it just opened (in January) – and we built it at a time when even the capital was not R&D-tax eligible.” The article concludes with Roy Aitken, executive vice-president of a mining company based in Toronto) stating before the same parliamentary committee that to encourage R&D, the Canadian government should seek to “improve the investment tax credit (ITC) for R&D” with Eric Bloch, then director of the National Science Foundation, stating that investment in “core disciplines and research facilities” and “a large investment in human resource development through education and research initiation” are the “cornerstone of increased national productivity and economic competitiveness.”


Ottawa Citizen

Software group urges firms to seek R & D tax credits

Mike Urlocker, Ottawa Citizen.

July 8, 1988. This article examines opposing views by industry professionals towards Canada’s R&D tax credits. The first opinion featured is of Joe Koenig, president of the Ontario Software Development Association and Interactive Image Technologies Inc. “an educational software company.” In the article, Koenig is quoted as stating, “70 per cent of software developers are missing out on the credits, which allow companies to be paid back up to 35 per cent of their research costs” and that one of the reasons for this may be due to many software companies consisting of “three or four employees who either aren’t familiar with the credits or whose accountants are unaware.” Koenig acknowledges “firms that applied for refunds may have abandoned the program because of delays in receiving payments or disagreements over [Canada Revenue Agency]’s auditing process.” Koenig, however, ultimately comes out in support of the tax credits by stating, “the amount of money in lost tax credits may not seem large but the savings could be critical for a small company in the early stages of research and development.” In almost direct opposition to this view, the second opinion comes from Lorne Bowerman, president of R & L Microservice Inc. with five employees. Bowerman claimed he “didn’t need ‘outside help’ to be profitable” and “the amount of paperwork needed to apply for the tax credits outweigh[ed] the payout.” The final opinion is also in contrast to Bowerman’s, as Richard Benneworth, vice-president of Zanthe Information Inc. with 35 employees, whose “firm applied ‘religiously’ for the tax credits every year” stated, “once you’ve done it the first time, it’s not so bad.” The article concludes with government acknowledgement that “small companies might not apply for the credits,” however state that they did not know the extend of the issue and that “companies reported a variety of reasons for not applying.”

Toronto Star

Let’s set corporate tax to support research

John Evans, Guest Contributor, Toronto Star.

February 9, 1988. In this article Evans (president and chief executive officer of a biopharmaceuticals company in Toronto) proposes how companies can become “more involved in R&D.” Evans’ suggestions focus on encouraging industries that were not already investing in R&D, to do so. He stated, “only 2 per cent of Canadian companies do R&D and two-thirds of the R&D is carried out by less than 7 per cent of that group” and references Robert Solow (awarded the Nobel prize in 1986 for work “establishing that technology is at least as important as capital, labor and resources in determining the level of economic growth”) in that one way to get the other 98 per cent to “develop technological capability to meet their needs” would be to establish an “R&D levy of about 1-2 per cent of pretax profits on all corporations with an appropriate floor to exclude corner store ‘operations’.” Evans also suggests that “incentives should be offered to industry, universities and technical colleges to expand greatly specialized course work and on-the-job retraining to assist workers to cope with technological change” in order to further encourage companies and industries that were not then investing in R&D to do so.

Additionally, Evans encourages firms to “enter strategic alliances for joint product and technology development and R&D consortia including several industries and university research groups.”* Evans concludes that he recognizes that “tax levies for a specific purpose have, in principle, been taboo with finance departments since the Napoleonic era,” however, much like is mentioned in the Canada on sidelines so far in high-tech race article from the Star in January 1987 (summarized above) – there needed to be a shift in attitude towards R&D in Canada and so, ” why should finance departments be exempted?”


*Interestingly, in 2017 – 29 years after Evans’ article was published – the Canadian government introduced the Superclusters Initiative with the purpose of encouraging strategic alliances.


Toronto Star


How Wilson’s tax reform plan undercuts high-tech industries

David Crane, Toronto Star.

September 5, 1987. In this article Crane is critical of the then Mulroney government’s actions towards research and development (R&D) – on one hand they recognized the importance of “high-tech industries” and on the other, they continued to reduce “incentives available for business R&D.” Crane states, “high-tech industries, and the science and technology community in our universities that supports them, seem to have been in constant battle with Prime Minister Brian Mulroney and his government almost from the day the Progressive Conservatives were sworn into office [in 1984].” Crane suggests that then Finance Minister Michael Wilson is “making it more expensive for Canadian companies to carry out needed innovation for new products and services through R&D.” Crane believed “Wilson’s reasons [were] understandable” as Wilson intended to “create a corporate tax system that treats all types of businesses alike and that offsets the loss of tax incentives with a lower over-all corporate tax rate.” The reduction in support for R&D led to “five of Canada’s high-tech industry associations […] the Canadian Advanced Technology Association, the Canadian Association of Data and Professional Service Organizations, the Aerospace Industries Association of Canada, the Electrical and Electronic Manufacturers’ Association of Canada, and the Information Technology Association of Canada,” which at the time claimed to “conduct more than 80 per cent of all the private sector R&D in Canada” to form an alliance to “get Wilson to rethink” his plans to limit “investment tax credits for R&D,” which were planned to cut the “amount of qualified research expenditures receiving usable support from investment tax credits” in half.

These associations acknowledged that tax support in Canada for R&D was “more generous than U.S. support for its industry” and the article references a 1986 study that estimated “tax incentives accounted for 8 per cent of the costs of industrial R&D in Canada, compared to 7 per cent in the U.S. and 6 per cent in West Germany,” however, the article continues to highlight that at the time the article was written, other countries provided additional support for R&D through “direct grants and other forms of assistance” that accounted for “33 per cent of the cost of industrial R&D performed in the U.S. and 18 per cent in West Germany, compared to 12 per cent in Canada.” The article concludes that while the Mulroney government had taken some positive measures, including the establishment of “a National Advisory Board on Science and Technology” and organizing a “new Department of Industry, Science and Technology,” ultimately the government were not doing enough to support R&D and that the “dispute between the government and the high-tech industries over tax policy once again underlines the lack of a coherent national strategy to develop our industries for the future.”

Tax reform plans seen discouraging critical research

George Brett, Toronto Star.

August 29, 1987. In this article, Brett references a “joint brief” brought to the House of Commons standing committee on finance and economic affairs by a group of organizations that represented “more than 700 companies and 210,000 employees doing more than 80 per cent of Canada’s private-sector R&D,” including: “The Information Technology Association of Canada, the Electrical and Electronic Manufacturers Association of Canada, the Canadian Advanced Technology Association, the Canadian Association of Data and Professional Service Organizations and the Aerospace Industry Association of Canada.”

The group criticized the then Finance Minister, Michael Wilson’s, tax reform plans* and stated the Canadian federal government did “not offer the same level of R&D grants, (defence) contracts or technological transfer mechanisms from government R&D available elsewhere.” The groups claimed Wilson’s reforms could “‘leave roughly 40 per cent of the R&D performed by Canada’s high-tech companies’ non-deductible” and concluded that, ultimately, this would “place companies manufacturing in Canada with related distribution companies at a major disadvantage when competing with importers who trade with unrelated suppliers.”


*As referenced in previous Toronto Star articles from 1987, which included cuts to R&D.

Canada on sidelines so far in high-tech race

David Crane, Toronto Star.

January 21, 1987. In this article, Crane discusses the government’s response to Canada’s research and innovation industries. Crane views the scientific and technological industries as important to Canada’s industrial success, in the wake of other countries moving into traditional manufacturing. The article, however, is apprehensive of Canada’s ability to improve standards in research and development (R&D) and states, “while other countries are developing powerful computer chips, miracle drugs and amazing new materials, Canada is largely sitting on the sidelines.” Crane refers to “two secret federal documents” that “show there’s a clear understanding in Ottawa that Canada’s backwardness in the high-tech world poses a grave threat to [Canada’s] economic future.” One document he states is from the “Privy Council Office” that states Canada must “invest in science and technology, encourage innovation and instil a spirit of entrepreneurial dynamism within the society as a whole.” The article, however, then references a cabinet document prepared under Science Minister Frank Oberle that is critical of Canadian business’ “failure to invest in research and development (R&D) and their unwillingness to put money into the support of Canadian universities” as well as the government’s own “modest” spending on science and technology, stating the Canadian government spent “proportionately less on R&D than governments of other industrial countries,” which (in 1987) was “just 1.3 per cent of its Gross National Product […] compared with … the U.S., Japan, Germany and Sweden, which all spend 2.5 per cent or more.”

Crane continues to outline where the “lagging effort in R&D” began, and proposes that it predates the election of [then] Prime Minister Brian Mulroney in 1984. Crane suggests, during the majority of his time in office, Pierre Trudeau [1968 – 1979 and 1980 – 1984] “did little to bolster Canada’s R&D effort” and that it was “only in his final years in office that Trudeau began to increase support.” It was under Mulroney and Finance Minister Michael Wilson that “the flawed but fixable scientific research tax credit was wiped out […] drying up business funds available for R&D.”* The article lists initiatives that had their funding cut or were abandoned, including “the National Research Council had its budget cut from $520 million in 1984-85 to $398 million in 1986-87” in which its “most important industry support program was slightly reduced instead of being increased to keep up with inflation,” the “proposed Canadian Microelectronics Corporation Research Centres – was killed” and “the main agency that funds the training of Canada’s future science and engineering research and equipment for university research laboratories, the Natural Sciences and Engineering Research Council, was told that its budget would be cut.” In response to “widespread criticism” of these measures, the government promised to “create a National Advisory Board on Industrial Technology,” however, the article concludes that (at the time it was written) “Mulroney’s advisory board has still not been appointed” and so, “if [Canada] fail[s] to build that new economy, the government will have to spend much more supporting unemployed Canadians and will have a much smaller base from which to collect taxes. That means future deficits will be even bigger, but there will be less chance of paying them off.”


* It is worth noting that it was under Trudeau’s government that the scientific research tax credit (SRTC) was introduced in February 1984, whereas Mulroney was only elected in September 1984.



Globe and Mail

Firms still draining revenue through R and D credit

Linda McQuaig, Globe and Mail.

[Important: The SRTCs were replaced by the SR&ED program in 1986, with the loopholes described below eliminated.]

November 27, 1984. In this article McQuaig investigates the “quick flip,” which was an aspect of the Scientific Research Tax Credit (SRTC) when it was introduced in 1984 that was used as a loophole for investors. The loophole “allowed the investor to qualify for a tax break by simply carrying out a high-speed financial transaction that was virtually risk-free.” McQuaig goes on to explain, “companies were entitled to a 50 per cent tax credit on money spent on R and D” McQuaig continues, “if [the company] were unable to take advantage of this break themselves, usually because they were already paying little to no tax, they could sell the tax break.” This effectively resulted in investors being able to give for example, “$100,000” to a company and “immediately get back $50,000 plus a tax credit worth $50,000” and “a premium bonus from the R and D company, ranging anywhere from 2 to 12 per cent,” which depended on how quickly the company needed the money. This meant, however, “the company would have to carry out a full $100,000 worth of R and D to qualify for the $50,000 tax credit [the company] had just sold” and “if it failed to do so, it would be liable to pay tax.”

The SRTC had cost the “federal treasury between $1.2-billion and $1.5-billion in lost taxes since it was introduced” in January 1984. Canada Revenue (CR) (now the Canada Revenue Agency (CRA)) sought to curb this “unexpectedly high loss” by imposing a moratorium on the ability for investors to “quick flip.” This, however, led to companies trying to “take advantage of the [grandfather] clause,” which allowed them to continue transactions “begun before the moratorium was imposed.” The article suggests that companies were abusing the “grandfather clause” as McQuaig quotes then CR Minister, Perrin Beatty as stating, “in come cases it’s pretty tenuous how grandfathered [the transactions] are.”

Revenue Canada takes steps to plug R and D loophole

Allan Robinson, Globe and Mail.

[Important: The SRTCs were replaced by the SR&ED program in 1986, with the loopholes described below eliminated.]

February 17, 1984. Robinson examines the loopholes in the Scientific Research Tax Credit (SRTC) program, quoting Jack Bernstein (then tax partner at then chartered accountancy firm, Laventhol and Horwath) as stating, “hundreds of millions of dollars have gone into the R and D tax shelters.” The loophole “allowed investors to defer tax payments paid by quarterly instalments” and lead “investor returns to shrink from 10 per cent to 2.5 per cent and lower.”

Robinson explains that “the scientific research tax credit” (SRTC) allowed companies to “transfer R and D deductions they cannot use to investors” and in turn investors could “claim a tax credit equal to about 50 per cent of their investment.” This then introduced the possibility for investors to reduce their taxes by “nominal amounts by applying the R and D tax credits […] to eliminate instalment payments required on their 1984 taxes, thereby gaining use of those funds” until they filed their tax returns. Robinson continues to highlight that “many of the R and D tax shelter deals are private” and that in these cases “the investor receives the tax credit equal to about 50 per cent of the investment, and the company pays the investor the balance plus a premium shortly thereafter. Canada Revenue (now Canada Revenue Agency (CRA)) proposed, “future tax instalment payments must be based on taxes payable before the deduction of R and D tax credits.”

Tax help on the way for the R&D

Gordon Riehl, Guest Contributor, Globe and Mail.

[Important: The SRTCs were replaced by the SR&ED program in 1986, with the loopholes described below eliminated.]

February 14, 1984. In the article Riehl discusses the SRTC and how companies can claim it. Riehl writes, “Revenue Canada will be issuing a special pamphlet to help tax payers properly claim the new [SRTC] when filling out their 1983 tax returns” as “the returns were printed too early to accommodate the credit.” Riehl explains that the SRTC only received “legal sanction” in January 1984 and highlights that the SRTCs are available “on special shares, debt or scientific research financing contracts issued by companies undertaking research and development,” that tax credits acquired “before Feb. 29 can be applied against 1983 taxes payable” and that “any unused balance can be carried back to 1982.”

Riehl highlights that Québec was not then part of the SRTC program, however, Québec had stated it “would participate in the program.” In 1984, the tax credit in Québec was due to be “25 per cent … against Quebec provincial tax payable,” which would make the total credit worth “53.39 per cent when combined with the federal portion of the credit, which is 28.39 per cent for Quebec residents.”

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Show 3 footnotes

  1. Oved, Marco C. (2016, November 14.) CRA investigating 85 Canadians for tax evasion tied to Panama Papers. Toronto Star. Retrieved from:
  2. CBC. (June 22, 2000.) Ottawa to scrap controversial jobs fund. (Accessed: August 3, 2017.) Retrieved from:
  3. Statistics Canada. (June 23, 2017.)Gross domestic expenditures on research and development (GERD) as a percentage of gross domestic product. Retrieved from:


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