According to July report by Statistics Canada, Canadian industries plan to reduce spending on research and development (R&D) for the first time in 30 years by 6.1 per cent to $11.2 billion.
This is one reason why the Canadian Advanced Technology Alliance (CATAAlliance) recently hammered out six recommendations on how to create an economic environment for technological innovation and presented to them Canada’s Innovation Strategy consultants.
Canada’s Innovation Strategy is a federal government initiative, a blueprint for action to make Canada known for its culture of excellence, learning and innovation.
“We believe that the critical need is a stimulative environment for innovation, an atmosphere where creativity can flourish,” said Dave Paterson, executive director of CATA Alliance. “The necessary strategy has only four ingredients: a competitive tax structure; strong support for research and development; strong support for skilled human resources; and an efficient regulatory regime.”
To help companies develop new technology, and to help companies increase spending on R&D, CATA Alliance wants the government to make scientific research and experimental development tax credits (SR&ED) available to companies whether they are profitable or not.
“If no taxes are owing, which is common in this difficult business environment, these credits are of little value during times like this,” said Russ Roberts, Senior Policy Director for CATAAlliance. “Specifically, companies lose their R&D support just when they need it most. This fair weather nature of the tax credits available to public companies only aggravates the stress that the downturn is putting on R&D budgets.”
Christopher Heggteveit, a spokesperson for the Canadian Department of Finance, said the department’s position is that the law should not be amended.
“Our position is that Canada’s SR&ED tax incentive program to promote spending on R&D is one of the most advantageous systems in the industrialized world,” he said. “It provides over $1.5 billion of investment tax credits on an annual basis to about 11,000 businesses operating in all parts of the country.”
Statistics Canada also reported that R&D spending is predicted to fall 23 per cent in the telecommunications equipment sector and 12 per cent in the semiconductor sector.
CATAAlliance also recommended the government take this SR&ED tax credit program, the Industrial Research Assistance Program (IRAP) and Technology Partnerships Canada (TPC) under one governing body.
“Governments are notorious for having unconnected information systems and poor cross-agency coordination,” said Barry Gander, director of public policy for the CATAAlliance. “We need a clearing house or coordination centre, to ensure that our programs are not only supporting one another, but also are not in actual conflict.”
IRAP is currently managed under the National Research Council (NRC) and Margot Montgomery, the Director General of IRAP, believes the program’s effectiveness would be jeopardized if it was lumped in with SRED and TPC.
“If we were an arms-length from government that brought together these programs in a single-delivery agency, I would question how well we would remain linked to the depth and breadth of scientific expertise, she said.”
IRAP focuses on providing both financial and consulting assistance to small and medium-sized businesses if the cost of their research does not exceed $1.5 million. NRC currently has a complement of about 300 field scientists who work on-site with the research departments in those businesses.
TPC is a centralized, large-project-oriented program that supports research in environmental technologies, enabling technologies (advanced manufacturing and processing technologies, advanced materials processes and applications, applications of biotechnology and applications of selected information technologies), and aerospace and defence.
Another recommendation is to eliminate capital taxes – on both a federal and provincial level. Alberta has eliminated them while B.C., Saskatchewan and Ontario are also planning on changing their capital tax laws.
“Capital taxes are diametrically opposed to every aspect of innovation strategy,” said Gander. “They discourage innovation, the investment in the new technologies, processes and equipment which must take place if Canada is to grow.”
In order to help Canada grow, CATAAlliance said they’re dedicating themselves to creating eCanada. They want the government to accelerate the pace and increase the funding of the government’s broadband Internet access program.
Currently the National Broadband Task Force advises the government how to make high-speed broadband Internet services widely available to all Canadian communities by 2004. Right now 75 per cent of Canadian communities lack broadband access.
The fifth recommendation is to eliminate residency requirements for skilled immigrants coming into Canada. However, Susan Scarlett, a spokesperson for the Ministry of Citizenship and Immigration, said there are currently no residency requirements for immigrants. There have been proposals to prevent immigrants from moving to Montreal, Vancouver or Toronto for their first five years in Canada, but nothing has been put in the books.
Gander also said that the government’s new legislation, while an improvement over the previous version, would prevent foreigners who have recently graduated from universities outside Canada from obtaining visas.
Scarlett said it is difficult for Canadian graduates to find jobs, let alone individuals with no Canadian experience or education. She said employers give preference to those possessing Canadian work experience and Canadian education.
Under the new point system, prospective immigrants need at least one year of work experience to be admitted to Canada. Applicants who were educated or have Canadian work experience are given extra points.
“What we are looking for is a skilled labour force,” Scarlett said.
“As a result, our selection criteria are designed to get people who hit the ground running, who have the education and experience (to be successful).”
Finally, CATAAlliance recommended that the government devise an official strategy to create more opportunities for innovation in Canada.
“There is no official strategic plan for Canada,” said Gander, who also added a positive note. “In some areas, departments like Industry Canada are to be commended for taking the lead on their innovation strategy, and CATA is pleased to be working with Industry Canada on that initiative to establish a plan.”