According to a report by Geoff Dembicki of the TheTyee.ca, the cuts of SR&ED tax credits will erode the ability of fossil fuel producers to reduce their environmental footprint. Bob Bleaney of the Canadian Association of Petroleum Producers (CAPP) reasons that oil and gas producers need to continuously improve on environmental and social performance.
In 2007, the federal government provided approximately $305 million worth of tax credits to oil, gas, and mining companies to offset costs related to technology and innovation. However, the 2012 federal budget has trimmed its support for the SR&ED program, and once these cuts take effect in 2014, (1) the basic refund rate will be reduced from 20 percent to 15 percent, and (2) oil and gas companies will no longer be able to claim SR&ED on capital expenditures.
Finance Minister Jim Flaherty has admitted that a leaner SR&ED tax credit program is not popular with large businesses who conduct research and development in Canada. However, Flaherty dismisses suggestions that SR&ED cuts could seriously undermine innovation in Canada.
Gradek Energy, a small Montreal-based cleantech firm disagrees with Flaherty. President Thomas Gradek believes that the SR&ED cutbacks could increase the cost of large scale projects substantially. Without the SR&ED program subsidy, pilot projects related to cleaner oilsands will no longer be economically viable. And without these pilot projects, the expenditures related to a large commercial scale deployment could cost up to 20 times more.
