Posted March 30, 2012
In keeping with recommendations made in the Jenkins Report, the Federal Government has indicated that it will begin to shift from an indirect tax-based approach to encourage research and development to a more direct grant-based approach. The Budget will remove approximately $35 million from SR&ED in 2013/2014 by:
In addition, the Budget also contains proposals to review the need for businesses to pay third parties to assist with the SR&ED incentive program.
The Budget also announced $500 million in direct research and development and innovation stimulus through:
The Budget also announced plans to invest an additional $95 million over the next 3 years to make the Canadian Innovation Commercialization Program, which connects small and medium-sized enterprises with federal departments and agencies that have a need for innovative products and services permanent. There is also a proposed allocation of $37 million to enhance the granting councils’ support for industry-academic research and partnership initiatives. This includes $15 million to NSERC and $15 million to CIHR. The balance of the new direct funding is for sector specific initiatives such as $105 million for forestry and genomics research.
The Budget also addresses the need to assist emerging knowledge-based companies to access risk capital. It promises to make $400 million available to help increase private sector investments in early stage companies. The nature of this funding and its delivery mechanism are to be determined through a consultative process.
Overall, the Budget commits the Government to over $5 billion in ongoing departmental savings achieved through program closures and a 12,000 person reduction in employment over 3 years. The Budget restated the importance of the role that Shared Services Canada will play in achieving the “back-office efficiencies” that will drive this saving. The Government will introduce legislation establishing Shared Services Canada with a mandate to deliver value for money for Canadian taxpayers “and giving it the necessary authorities to maintain the integrity of its mission critical operations and to realize the efficiencies for which it was created.”
In December 2008, the Advisory Panel on Canada’s System of International Taxation released its report. The panel’s mandate was to recommend ways to improve the competitiveness, efficiency and fairness of Canada’s system of international taxation. In its 2011 budget, the federal government indicated that it was studying the recommendations in the report and would “provide a response in due course.”
Several measures contained in the 2012 budget are a direct consequence of the panel’s recommendations, in particular those relating to the thin-capitalization rules and so-called “debt-dumping” transactions. For example, Budget 2012 proposed reducing the debt-to-equity ratio from 2:1 to 1.5:1, and extending the rules to partnerships of which a Canadian-resident corporation is a member by effectively allocating to the partner the proportionate share of the partnership’s obligations.
For further information, contact Lynda Leonard – 613-238-4822 x2239.