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Business leaders converge on Parliament Hill to discuss the future of SR&ED tax credits

Published by CME Webmaster on February 15, 2012

Canadian Manufacturers & Exporters (CME) is leading an important business delegation on Parliament Hill today to discuss the potential changes made to the Scientific Research & Experimental development tax credit (SR&ED). Ten companies from various industry sectors, both large and small, will participate to the meetings and express their concerns about some of the changes that have been proposed recently, including the Jenkins Panel recommendations.

"The SR&ED tax credit is the cornerstone of Canadian manufacturing's R&D investment. About half of the claims are made by manufacturing firms, and the manufacturing sector represents more than 80 per cent of all private sector's R&D expenses in Canada", said Jayson Myers, President and CEO of CME.

In recent years, the SR&ED program has been highly criticized for Canada's poor productivity performance, in comparison to the US. According to Myers, "It is unfair to blame the SR&ED program for the overall poor performance of our economy in productivity. First, the productivity gap between Canada and the U.S. has narrowed in manufacturing but grown for services in the last 25 years. Manufacturing accounts today for about 14 per cent of our economy while services account for more than 75 per cent."

Other reasons, such the lack of collaboration from the academic sector in doing research driven by the private sector, can explain why governments do not see all the dividends from their investments. Canada spends about $14 billion in basic and fundamental research every year, compared with about $3.5 billion spent through the SR&ED program, and very little of this research is done in collaboration with the private sector. The only programs that allow private sector's participation, such as business-led centres of expertise for example, will see their funding sunset in a couple of years.

The main objective of CME meetings today with government officials is to send the message that Canada's innovation and productivity must be looked at from a broader perspective than just the SR&ED program. This program is working very well for the manufacturing sector, which responds by being the leader of all industries in terms of R&D expenses. "There are certainly ways to improve its administration and the kind of activities eligible for the tax credit, and this is why we are having these companies with us here today to discuss", said Myers.

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