DAILY NEWS Feb 23, 2013 7:00 AM - 0 comments

CATA launches Canadian version of 'patent box'

Concept would accelerate IP exploitation, commercialization success rates in Canada

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Ottawa-based high tech association CATAAlliance has launched an Advocacy Campaign to encourage the adoption of a Canadian form of the ‘patent box’ The Canadian ‘Innovation Box’ would be tailored to provide a preferential, competitive tax regime for the successful exploitation and commercialization of Intellectual Property (IP), including patents, in Canada.

The Innovation Box campaign took the form of a ‘live brief’ with updates continually posted based on the expert guidance of thought leaders across Canada.

“Governments across the globe are looking at how to adopt tax incentive regimes that will encourage companies to locate, exploit and commercialize technologies in their jurisdictions. Our consultations demonstrate that action is likewise needed to eliminate Canada's commercialization gap,” says CATA president John Reid.

"Canadians are eminent innovators but we have a poor record for fully reaping the benefits of our investments in innovation. The Federal Government has it right in the 2012 Budget which acknowledged that the challenge is our failure to commercialize our innovations – not our failure to innovate. It is time to do something. An Innovation Box tailored for Canada fits the bill. It would reduce the tax rate on income arising from the exploitation and commercialization of IP at home,” Reid added.

For a copy of CATA's take on the 2012 federal budget "as a work in progress" and the importance of addressing the Commercialization Gap, please review:


Adoption of the Innovation Box to bridge-the-gap

Patent Boxes have been adopted by countries such as the Netherlands, Belgium, Hungary, Luxembourg, the UK, China and Spain. A main driver for the UK Patent Box is to incent companies to keep their IP in the UK. And, now, a patent box is actively being considered in the US as part of its drive to regain economic hegemony.

Roberts added, “The benefits offered by a carefully designed Innovation Box would be to encourage companies to base their R&D activities in Canada and to commercialize them here. This rebalancing of the federal tax regime would result in more scientific and high tech IP being commercialized and based in Canada. It would help us advance our place as a world leader in the successful exploitation of technologies to their fullest."

"Additional rebalancing of the tax regime", he noted, "would be important in effectively meshing other tax policies so that they complement the goals of the Innovation Box. For example, the foreign affiliate rules currently incent Canadian companies to locate income from IP in low tax jurisdictions rather than in Canada. An Innovation Box could be useful in keeping economic activity associated with developing, acquiring and commercializing technology onshore rather than going offshore. It could provide better balance."

Mr. Reid noted that "Rather than leading with new concepts and approaches such as Innovation Boxes and Crowdfunding, Canada seems to be behind the curve. We are imperiling our Innovation future and risk continuing to squander our creative investments in R&D and intellectual capital. This is all because of a failure to effectively address the Commercialization Gap and go one step better than the practices of our trading partners who intend to fully benefit from their investments."

"As suggested by the C.D. Howe Institute, with the increase in global tax incentives for the commercialization of R&D, Canada needs to consider improvements to the tax treatment of IP that is commercialized here to remain globally competitive."

The Advocacy Campaign, known as the "Innovation Box Campaign", forms an integral part of the industry's Competitive Innovation Nation program, a program, under the tutelage of Canada's leading entrepreneur, Sir Terence Matthews, that lays out what we must do as a nation to move us from a 13th place ranking to first place in innovation rankings.

“The Key is how to keep IP at home and commercialize it. Our foreign affiliate rules are not neutral with respect to taxation of IP income taxed in Canada vs. IP income taxed in a low tax jurisdiction and then brought back to Canada tax free. One approach is lower corporate tax rates - starting with low tax rates on income derived from Canadian developed IP,” says Vik Sachdev, partner at PwC Canada

“If Canada is to become a Competitive Innovation Nation, we've got to do a better job of supporting, growing and retaining our high tech companies and the people that power them,” Sachdev concludes.

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