Innovation group pitches gov’t on new model for tax incentives

Ottawa-based innovation lobby group CATAAlliance, has called on the federal government to create an independent administrator to deliver tax incentives in support of innovation and for the Overhaul of Canada’s system of tax incentives for innovation.

Policy proposals were validated and supported by a newly published research paper authored by CATA Sr. VP, Russ Roberts and CATA research director, Catherine Bishop who reached out to tens of thousands of executives in opt in social networks, advisory board members, including video interview commentary, subject area experts and research teams, to determine community innovation guidance.

Address major issues with the current system of tax incentives for innovation

“The proposals we have developed address major issues with the current system of tax incentives for innovation, particularly where the current system itself is a barrier to the growth of emerging technology firms and effectiveness of credits as influencers of businesses to invest in innovation, growth, commercialization and exports,” according to CATA CEO, John Reid.

Russ Roberts, added, “Our concern is that the leaders of the current government’s innovation agenda may not be getting the message that improvements to SR&ED can be achieved. They appear too focused on creating new programs, not realizing that they cannot get it right unless they get Canada’s tax incentives right.”

Encourage the Government to strengthen Canada’s tax based incentives for innovation

Reid of CATA added, ”We strongly encourage the Government to strengthen Canada’s tax based incentives for innovation. The intent should be to maximize the return on these investments (ROI) to the Canadian economy. Focusing simply on direct funding and not dealing with the weaknesses in Canada’s tax based incentives is not enough.”

“Our competitors recognize the critical role of focusing on developing results-oriented, effective tax incentives in the support of innovation. If the Government does not seize this opportunity, Canada will continue to earn a low ROI on these major investments in innovation,” Reid adds.

Summary of Proposals

1. Set up a new administrator for all government tax based programs in support of innovation, including the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program
2. Establish an independent, working innovation tax group
3. Create a new Digital Innovation tax credit refundable tax credit for smaller businesses coupled with a new Innovation Box incentive to support commercialization and export
4. Create a new Innovation Box incentive to support commercialization and export
5. Require Initial Submission and Certification to support claims for the proposed new Digital Innovation tax credit
6. Develop cost estimates and full details of CATA Proposals
7. Improve SR&ED Tax Incentive Program

7-1. Eliminate Retrospective claims for SR&ED tax incentives

7-2. Require Initial Submission of Technology Benchmarking and Plans for all claims for SR&ED

7-3. Implement effective, timely, independent, authoritative third party redress of problems as they arise in the reviews of SR&ED claims

7-4. Modify the non-refundable SR&ED program to support Above-the-Line (ATL) Accounting (booking) of the credits

7-5. Consider phasing out the refundable SR&ED tax credits for the ICT sector

”Progressive approaches to Canadian government innovation tax incentives can help put Canada on the map as a global innovation hub. The way forward is to act on a bold new public policy vision. Failure to adopt a new model for delivering innovation incentives will roadblock the government’s declared intentions of building Canada as a global centre for innovation,” Reid and Roberts concluded.