In assessing the federal government’s latest effort to foster the growth of R&D in this country, a group of high tech companies have issued an ‘A’ for effort, but adds that much more work remains to be done.
The CATAAlliance, in partnership with similar groups representing high-tech firms and entrepreneurs, released a report card on July 5, gauging the Canadian Customs and Revenue Agency’s performance in their plan to revitalize Canada’s Scientific Research and Experimental Development (SR&ED) Tax Credit program. The program offers incentives to Canadian companies involved in research and development.
“We see really strong improvements in Ottawa, in Vancouver, but in every one of the offices, if you look closely, you will see residual problems,” said Russ Roberts, senior policy director at the Ottawa-based CATAAlliance. “We don’t want to get across the message that it is not improving, because it has, tremendously. It depends of which office you are speaking about, but what we did see is that there is room for improvement in all the offices.”
Overall, the report card shows that 52 per cent of respondents saw improvements in the program over the last three years, in areas such as the overall understandability and clarity of the program and how it works. Only three per cent felt the service had declined. Toronto was the exception to these numbers, where the response was split. Twenty per cent saw improvements and 20 per cent said there were increased problems. Results that show a need for some fine-tuning are to be expected, Roberts said.
“They are only now getting to the point where they are separating the program fully from the audit environment to its own environment,” he said.
While Roberts said the report was not refined enough to deal with specific industry demographics, the eligibility of networking companies should be greatly assisted by the software guidance that the program has issued.
“We have completed training across the country with the CCRA on the software guidance and it is directly applicable to networking and understanding what is available,” he said. “Basically, what is eligible [for the credit] is the work that’s conducted to create some new technologies or to improve the technologies and their capabilities over what was there before. That is what the program is focused on supporting.”
Gaylen Duncan, president and CEO of the Information Technology Association of Canada (ITAC), said he agreed completely with the statistics stemming from the report. ITAC was a member of the group involved in the report card.
“I believe there has been improvement and I believe that Toronto centre is still a problem,” he said. “To say that improvements haven’t been done fast enough, well, I don’t know how you could have done it faster.”
Duncan said the biggest challenge in the program is recognizing that it is not just for the scientific research, but also for experimental development.
“Certainly one of the complaints that my members had is to recognize that this is not just support for white-smock research and development,” Duncan said. “In networking, there is some of that, but there is a lot more that is commercial-able exploitation. The complaint we heard is that commercial-able exploitation was not being recognized.”
Norine Heselton, the director general for the SR&ED program, said that since the program encompasses all sectors of the Canadian economy in all parts of the country, it is hard to talk about specific industries like networking.
“It is a demand-based program,” she said. “Clearly there are challenges for various sectors because the technologies evolve so quickly and that creates a challenge for industry in expressing the work they have done as well as for the CCRA in terms of keeping current with technology.”
There are no hard and fast rules for dealing with those challenges, she said. Instead, the program has to move with the industries.
“We have to work with industry on a day-to-day basis, through everything from our committees or through using approaches such as process review, which gets you away from looking at the details of individual work and gets you looking at the system a company has in place for describing and identifying their SR&ED work,” Heselton said. “It is getting involved in front end rather than the hard end when the claim is submitted.”
Roberts said this attitude shows a real effort on the part of the government and the private sector to prevent Canada’s brain drain from damaging the industry.
“It represents a joint contribution to support research of the federal government and the private sector,” he said. He added that the incentive is “broad-based,” in that the tax credit is designed to do everything from bring international research and development projects to Canada and to help small companies in the start-up phase.
“And it’s not just designed to support that ‘Eureka’ jump forward,” he said. “It’s designed to support the improvements in technologies in existing products.”
The CCRA has detailed guidelines that explain which SR&ED projects qualify for tax credit and provide a list of procedures regional managers are required to follow.
The Canada Customs and Revenue Agency is at http://www.ccra.ca. CATAAlliance, in Ottawa, is at http://www.cata.ca