Reduction of SR&ED Tax Credit Detrimental to Canadian Businesses

Many of Canada’s largest research and development have voiced their concerns over the federal government’s cuts to the SR&ED program.  According to a report by Canadian Manufacturers and Exporters (CME),  Canadian businesses will receive a $750-million / year reduction in their funding from SR&ED.  This could make Canada less competitive in the global economy, which could motivate large multinationals to move their R&D activities  to other countries.

For example, executives of Research In Motion Ltd. have found that the SR&ED changes will cost the company $50 million a year.  Morgan Elliot, RIM’s director of government relations, pointed out that RIM spends $1.5 billion a year on research and development, and pays more than $1 billion in corporate taxes, which means that the $50 million is a good investment for the federal government.

The Liberal critic for Science and Technology, Ted Hsu, also voiced concerns that the cuts to the SR&ED program hurts industrial sectors such as aerospace, automotive, information and communications technology, and oil and gas.  Although the federal government has planned to move savings from the SR&ED cuts into direct funding, Hsu opines that there is no evidence that suggests that direct funding works better than tax credits.

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