Opinion: R&D tax credit review needs to focus on the right issues
Our research and development intensity is low relative to other countries and not enough of our inventions are commercialized at home. Can Ottawa’s current review of the Scientific Research and Experimental Development tax credit announced in its last budget make a difference?
The federal review has two objectives. The first is to assess whether the SR&ED program is effective in encouraging R&D that benefits Canada. The second objective is to explore opportunities to modernize and simplify the SR&ED program. However, imposing these performance requirements would create an unpalatable trade-off: Less R&D would be performed in Canada, but a larger share would be commercialized here, with no guarantee that Canadians would be better off as a result. The performance requirement “stick” would lower the return to R&D, and hence the amount performed, because some firms could no longer choose to sell their IP to foreigners or to commercialize it abroad even when those are the most profitable options.
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