By Terry Lavineway
While last week’s federal budget contained widely anticipated changes to the Scientific Research and Experimental Development (SR&ED) tax credit, it also contained many other aspects of funding and incentives to encourage innovation and commercialization.
$400 million to help increase private sector investments in early-stage risk capital, and to support the creation of large-scale venture capital funds led by the private sector.
The government recognizes that access to capital for small and medium-sized businesses in Canada is both critical for growth and difficult to find. The venture capital and angel investor industries in Canada have been inconsistent for many years for many valid reasons. This budget commits $400 million to help address this problem. At the time of the budget, the government was not clear how, where or when to deploy this capital to incentivize private sector investments, other than to allocate $100 million for Business Development Bank of Canada venture capital activities. Certainly this amount of money is worth tracking to see how it will be deployed to help companies in need achieve their growth objectives.
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By Terry Lavineway
The Scientific Research and Experimental Development (SR&ED) program was one of the long-anticipated and highly debated areas expected to be addressed in the 2012 Federal budget. Politically, the government needed to show they were listening to their taxpayers over the last number of years given the amount of consultations, the amount of press and discussion about the SR&ED program and certainly “Innovation Canada: A Call to Action,” also known as the Jenkins Report.
The biggest change introduced relates to the tax credit rate available to SR&ED claimants that are not Canadian Controlled Private Corporations (CCPCs). The tax credit rate for non-CCPCs will decrease from 20 percent to 15 percent. This is a significant reduction. The government’s view is that the reduction of the corporate income tax rate since 2007 along with the corporate tax restructuring of non-CCPCs has resulted in growing pools of unused tax credits; these corporations are not generating enough taxable income in Canada to make use of all the SR&ED investment tax credits that they are generating. Therefore, the government reasons that they can reduce the rate from 20 percent to 15 percent without much impact. While this may be true in many cases, there are definitely large taxpayers in Canada that will be significantly impacted by this reduction. Only time will tell how this change will impact the amount of R&D performed in Canada by multinational corporations or even medium-sized corporations that do not qualify for the CCPC enhanced rate.
The other changes proposed are categorized as:
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By Terry Lavineway
The Ontario 2012 budget was released March 27, 2012. The general theme of the budget is getting efficiency out of the prior investments and government spending and cultivating the growth presumably inspired by previous stimulus budgets. This focus on efficiency carries through to existing programs and business-specific incentives, specifically with regards to research and development incentives and Apprenticeship Training Tax Credits (ATTC). Aside from these two areas, the budget was quiet with regards to specific tax credits and discretionary funding programs for businesses.
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