GM Canada plans to invest $850 in R&D (through 2016) as part of its obligations under the 2009 bailout. “The money represents exciting future implications with ripple effects that will be felt far and wide,” said Prime Minister Steven Harper.
The federal and Ontario governments invested a total of $10.5 billion in GM Canada in 2009, as the company struggled during the last recession.
Jim Flaherty, the Minister of Finance, and Gail Shea, the Minister of National Revenue, today opened consultations regarding the issue of contingency fees on the SR&ED program.
The consultations seek input from stakeholders to better understand:
• Why firms hire third-party tax preparers on a contingency-fee basis;
• Why these tax preparers charge contingency fees;
• The prevalence of this practice;
• The amounts charged; and
• The impacts of this practice on the effectiveness of the SR&ED tax incentive program.
Written submissions will be accepted in either official language and should be mailed to the address below by October 1, 2012:
SR&ED Consultations
Department of Finance
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Questions on the process may be addressed to:
SRED-Consultations-RSDE@fin.gc.ca
613-947-6563
Fax: 613-943-2486
Recently, the Thunder Bay Chamber of Commerce and the Kamloops Chamber of Commerce have jointly released a proposed resolution that criticizes the federal government for changes that disadvantage capital-intensive companies, like those in manufacturing, pharma, and biotech. The manufacturing sector has been particularly disadvantaged, due to the exclusion of capital expenditures, reduction in the general rate, and the reduction of the inclusion rate for contractor payments. These changes have largely excluded pilot plants and resource-intensive industrial processes from SR&ED eligibility.
The resolution recommends that the federal government:
A recent resolution proposed by the Windsor-Essex Regional Chamber of Commerce, and the Mississauga Board of Trade made recommendations that the federal government:
According to Ian Bell, in recent months, a growing number of startups have reported abnormally aggressive audits by SR&ED reviewers that have resulted in substantial reductions in SR&ED claims. There seems to be an overall strategy to reduce the claims paid out by the CRA, which has been confirmed by the reductions to SR&ED in the 2012 federal budget, and the flood of new auditors being hired by the CRA on LinkedIn.
Canadian entrepreneurs, when compared to US entrepreneurs, face the added challenge of highly limited sources of early-stage financing. Many entrepreneurs are relying on IRAP grants to bootstrap the company for the first fiscal year, and then on the SR&ED return to finance fiscal year two. With a reduction in the SR&ED program, and more aggressive audits from the CRA, Bell opines that SR&ED is turning into a game of Russian Roulette for startup companies. If a startup is depending on the cashflow from its SR&ED return, the chances have increased that its head will be blown off.
Administered by Canada Revenue Agency (CRA), the Scientific Research and Experimental Development (SR&ED or SRED) Program is a $3.5 billion business incentive program to encourage research and development in Canada.
This blog will serve to keep all Canadian small- and medium-sized enterprises (SMEs), small business owners and managers, and SR&ED practitioners up to date on the latest SRED news.
