Posted October 17, 2011
Citing the need to address “a funding system that is unnecessarily complicated and confusing to navigate,” the Expert Panel leading the Review of Federal Support to R&D released its report today. Among its six major recommendations was simplification of the tax credit system used to support small and mid-sized business. The Panel recommends a reform that would base the SR&ED credits for Canadian controlled private companies solely on labour related costs. Because the credit would be calculated on a smaller cost base than at present, the Panel recommends increasing the rate, but does not specify by how much.
ITAC has long been a proponent of a labour-based approach to SR&ED credits as a measure to address access issues for large Canadian and multinational R&D reformers who for a variety of reasons derive no benefit from SR&ED credits. The report makes no provision for this class of taxpayer though it does suggest that: “Overtime, the government should also consider extending this new labour-based approach to all firms.” Generally speaking, a labour-based approach works advantageously in ICT R&D where the greatest proportion of costs are labour related (though there are some equipment intensive small to mid-size R&D performers in the ITAC community). ITAC’s community of CCPCs has generally expressed the highest level of satisfaction with the existing SR&ED regime. ITAC has not made specific recommendations for reform on behalf of CCPCs. While we welcome the introduction of the notion of a labour-based credit program, we will be consulting with our membership to assess the broader implications of this recommendation.
The Panel’s report contained five other recommendations:
Access the full report