As the federal government prepares to table its 2008 budget, Bernard Courtois, the Information Technology Association of Canada (ITAC) president and CEO, is hopeful that reforms will be made to the Canadian personal income tax regime.
Courtois says that ITAC has outlined recommendations that are focused on the need to improve Canada’s productivity and its capacity for innovation.
He notes that ITAC has outlined two specific recommendations, the first of which is to reform the Scientific Research & Experimental Development tax credit program.
“The SR & ED program is the program we have in Canada to encourage commercial R & D,” says Courtois. “We don’t do well in terms of international comparisons in commercial R & D, although the ICT sector performs more than double any other sector.”
Courtois points out that the SR & ED tax credit program has not been reformed in 20 years, and is in need of significant improvement, “The most significant of which is for many big investors and people who really want to have significant R & D operations in Canada the tax credits don’t count at all in making an investment decision,” he says.
“That’s a very significant problem that has to be tackled.”
The second recommendation as outlined by ITAC, is to reform the personal income tax regime by increasing the income level at which the highest marginal tax rate applies. Courtois says this would help Canadian employer’s attract and retain highly qualified workers.
“Our income tax regime counteracts one of our great advantages, which is we’re a very attractive location to bring smart people from around the world and into Canada and we’d like to keep our best and brightest here and not have them go off to other jurisdictions,” says Courtois.
Courtois adds that Canadian personal income taxes are out of line with what exists elsewhere, particularly the U.S. where the Canadian top tax bracket comes in at a level which is a salary you’d easily pay an engineer.
“So this is something that needs to be addressed, and when the government announced it’s science and technology strategy they said they would address this, the prime minister said it, so we’re hopeful that they will live up to that.”