Jeffrey MacIntosh, Toronto Stock Exchange professor of capital markets at the University of Toronto Faculty of Law, opined in his recent article in the Financial Post that the changes to reduce the SR&ED program are ill-advised. Many of the 20,000 CCPCs receiving SR&ED tax incentives are early-stage firms that reside within the capital-starved stage between government-financed research and later-stage private financing (i.e. the “Valley of Death”). Any reduction in the SR&ED program could be a death blow to many of these seed-stage firms.
MacIntosh also criticizes the government’s comparative studies on direct assistance (via grants) versus indirect assistance (via tax credits). The Jenkins report relied heavily on a study by the federal Department of Finance which found that within 5 years of incorporation, only 2% of SR&ED recipients grew into large firms that still performed R&D. First of all, no comparative figures are offered for firms receiving direct assistance. Secondly, the data used in the Department of Finance study could be suspect. The study focused on firms that were incorporated in the period from 2000 to 2004- immediately following the bursting of the tech bubble, when failures were unusually high.
