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Natan Aronshtam, Global leader of Research & development and government incentives for Deloitte Touche Tohmatsu Limited, comments on Canada’s position in the competitive global market for R&D spending. He prescribes key actions that the government of Canada may consider for improving Canada’s incentives for research and development.
Tags : research and development, R&D, SR&ED, Scientific Research & Experimental Development, R&D incentives, innovation, competitiveness, the future of tax, tax policy, taxation, Canada, Deloitte

Research and development (R&D) brings quality jobs for educated workers, plus technology spillovers into unforeseen applications. Canada has historically led the way in tax policies that encourage R&D. Our incentive regime is a benchmark in many countries and can be seen as an efficiently targeted government expenditure. Therefore, we believe that the current Scientific Research & Experimental Development (SR&ED) framework should be retained.

Competition for research spending is high and intensifying — the number of countries providing incentives has recently doubled, and countries like France and Brazil have dramatically increased their incentives.
Canada must take action to stay competitive. We propose:

  • Partial refundability of the investment tax credit so incentives are available to more companies that are not yet profitable. Currently, only Canadian-controlled private corporations (whose income does not exceed the specified limit) may claim a refundable credit. Expanding the refundable credit to all corporations would appropriately reward the risks inherent in carrying out R&D in Canada.
  • More certainty in how SR&ED is delivered to all users, with policies that evolve in consultation with industry

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