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TMX Lobbies for Small Public Companies Accessing SR&ED – CRA Consultation March, 2024

TMX Lobbies for Small Public Companies Accessing SR&ED – CRA Consultation March, 2024 (Photo Credit: Mario Cuadros via:

The Department of Finance published a new statement on January 31, 2024, “Government launches consultations to increase Canadian research and development and intellectual property retention“. In this statement, the Government of Canada announced that they have launched consultations on how to improve support for research and development, and how to create and retain intellectual property in Canada. This statement marks the beginning of the long-awaited review of the SR&ED program.


We were contacted by the TMX Group in February, 2024 about the CRA consultation. They asked for our take on their proposed changes to the SR&ED program, and whether we have any insights that might add to it. We found their position compelling, because we would also like to see this program help more companies grow and succeed. Ultimately, we are on the same page, and we wanted to share some of our conversation with you.

Who is TMX Group? TMX Group (TSE:X) is the owner and operator of Canada’s premier equities and derivatives exchanges, Toronto Stock Exchange and Montreal Exchange, and Canada’s public venture growth platform, TSX Venture Exchange. TMX subsidiaries also provide clearing, data and other services to the international finance community.1

TMX’s interest in the CRA consultation on SR&ED ties in with a number of their key values, namely advocating for better markets and driving accelerated growth. What follows is a brief discussion of their proposal.

Small Public Companies and SR&ED

The TMX Group is championing the cause of publicly controlled small-medium enterprises (SMEs). Their position is that better access to SR&ED tax incentives by amending eligibility rules for small public companies would have a significant impact on a small group (~3k companies) that have similar characteristics to their Canadian-controlled Private Corporation (CCPC) peers (who make up ~20,000 applications) – and that this change would have a positive impact that goes beyond the companies themselves.

A CCPC is defined by the CRA as a private corporation, which meets all the following criteria by the end of the tax year:

  • They are a resident in Canada and were either incorporated in Canada or were a resident in Canada from June 18, 1971 to the end of the tax year;
  • They are not controlled directly or indirectly by one or more foreign individuals;
  • They are not controlled directly or indirectly by one or more public corporations (other than a prescribed venture capital corporation, as defined in Regulation 6700 of the Income Tax Regulations);
  • They are not controlled by a Canadian resident corporation that lists its shares on a designated stock exchange outside of Canada;
  • They are not controlled directly or indirectly by any combination of persons described in the three previous conditions;
  • If all their shares that are owned by a non-resident person, by a public corporation (other than a prescribed venture capital corporation), or by a corporation with a class of shares listed on a designated stock exchange were owned by one person, that person would not own sufficient shares to control the corporation;
  • No class of their shares of capital stock are listed on a designated stock exchange.2

When you think of a publicly traded company what immediately comes to mind?

Like many individuals, my assumptions were that they are generally large entities, with a large board of directors, and huge corporate office spaces filled with anonymous faces plugging away at mindless jobs in a sea of cubicles. Not a very enlightened view, but perhaps one shared by Canadian policy makers, because I have since come to learn that the vast majority of publicly traded Canadian companies, are SMEs.3 Not at all the type of hellish corporate landscape I had imagined. In fact, the only criteria for being classified as a public corporation in Canada, are as follows:

  • They must be a resident in Canada and meet either of the following requirements at the end of the tax year;
  • They have a class of shares listed on a designated Canadian stock exchange; and/or
  • They have elected, or the minister of National Revenue has designated them, to be a public corporation.4

What I have since learned is that a significant group of publicly traded companies in Canada, share similar characteristics with CCPCs, in their size (SMEs are defined as having anywhere from one to 499 paid employees), and the types of SR&ED activities they engage in. A SME is a SME whether it is publicly or privately controlled. All things being equal, for these companies, if the only difference is that they meet CRA’s criteria for classification as a public corporation, it doesn’t appear to be an equitable or fair policy to exclude them from such a significant tax incentive program. And as we will see below, there is more at stake for limiting research and development (R&D) tax incentives to private companies.

TMX Group Advocates For More Accessibility

The position of the TXM Group is that the existing eligibility requirements for SR&ED create an artificial disparity between privately and publicly listed SMEs. The current tax rules provide incentives to CCPCs that are not equally available to their publicly listed counterparts – thus presenting a potential growth barrier in the Canadian SR&ED market. As a recent article by Kevin Charmichael from The Logic points out, Canada has a soft spot for small companies, but the current disparity for certain small-medium companies (1-499 paid employees) unable to access the SR&ED program suggest that some small companies are more in need of this tax program than others.5

Public Companies Are More Likely to Stay In Canada

A 2021 research paper published by the University of Calgary’s School of Public Policy found that public companies grow faster, create more intellectual property and are more likely to stay Canadian (vs. private companies that are able to and often do sell to American ownership).

Given that Canada’s reliance on public markets is far higher than that of any other country — double that of the next-highest country — we should be alarmed that fewer and fewer companies are choosing to go public. Companies that stay private are, on average, less successful, less productive, less likely to grow into national champions, and more likely to be sold to foreign buyers. The current decline of public markets may go to the heart of what is arguably the biggest long-term policy issue in the country: our innovation gap and declining relative productivity growth.” (Bryce C. Tingle, QC and J. Ari Pandes, “Reversing the Decline of Canadian Public Markets,” The University of Calgary SPP Publications Volume 13:14, April, 2021)

With the stated risks associated with private companies selling to the US market, thus having their R&D funded by Canadian tax dollars, it seems somewhat contrary to the original intent of the SR&ED program to prohibit access to these tax incentives for publicly controlled SMEs which are more likely to remain in Canada – and keep their jobs and IP in Canada.

Canada Struggles With Scaling-Up Companies

The disparity between SMEs that are privately vs. publicly controlled, and TMX’s position on the SR&ED review, have been long supported by economic research. Pierre Lortie at the C.D. Howe Institute highlights Canada’s difficulty in scaling-up companies. They recommend that Canadian public companies should be eligible for refundable SR&ED credits:

High-growth and innovative Canadian companies lose most of the benefits of the federal SR&ED credits program when they go public, but not if they are privately financed. This bias of federal fiscal policy is counterproductive. Canadian public companies should be eligible for the SR&ED program in the same way as Canadian-controlled private corporations of comparable size and stage of development.” (Lortie, Pierre. “Entrepreneurial Finance and Economic Growth: A Canadian Overview.” C.D. Howe Institute, February 28, 2019, p. 20).

What does more accessibility look like?

TMX has outlined a number of suggestions for driving such innovation, the chief of which is improving accessibility for SMEs. Here are the specific proposed changes to improve accessibility to SR&ED tax incentives for all Canadian SMEs, as presented to us:

  1. TMX is advocating expansion of eligibility for refundable credit from “Canadian-controlled private corporations” to: “Canadian corporations” OR “Canadian-controlled private corporations and junior exchange-listed public corporations domiciled in Canada.”

  2. Introduce a “size test” as was adopted for taxation of employees’ stock options tax exemption in 2021: e.g. “Canadian controlled private corporations and Canadian-domiciled public corporations with annual revenues below $500 million.”


The changes being proposed to increase accessibility across all small business are relatively small changes (when compared with the size of the program), but they represent a potentially significant impact. With a relatively quick implementation, they would result in the improvement of equity in growth opportunity for Canadian companies.

Thus, we agree with TMX Group that the refundable portion of SR&ED should be made available to all Canadian SMEs regardless of whether they are publicly or privately controlled. In fact, it could be even more important to have these tax incentives available for publicly traded SMEs because public companies are harder to sell to US, and therefore more likely to keep research and development dollars in Canada and not fund someone else’s R&D.

If the current definition of success in the Canadian business world is selling a corporation to the US, we have to ask the question whether we have truly achieved success (or the aim of the program) if we lose that SR&ED and all its follow-on economic growth to another country.


Show 5 footnotes

  1. Overview – about US – TMX Group Ltd. Retrieved March 12, 2024 from:
  2. Government of Canada (November 30, 2023), Type of Corporation. Retrieved March 12, 2024 from:
  3. Government of Canada (November 7, 2023), Small and Medium Businesses: Driving a Large-Sized Economy. Retrieved March 12, 2024 from:
  4. Government of Canada (November 30, 2023), Type of Corporation. Retrieved March 12, 2024 from:
  5. Carmichael, Kevin (March 6, 2024). “Carmichael: Does Canada Discriminate against Public Companies?” The Logic. Retrieved March 12, 2024 from:

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