How to fix SR&ED

Justin Trudeau and Chrystia Freeland
Can a decades-old, $4 billion tax credit program be modernized to solve Canada's innovation woes?

Every once in a while, we like to check in on the state of the innovation economy with Council of Canadian Innovators (CCI) president Ben Bergen.

Lately, those check-ins have focused on a government that seems checked out: unwilling or unable to deliver on any of its major innovation promises. So much so that the last time Bergen was on The BetaKit Podcast, our guest wondered if the feds knew what an innovation strategy meant (ouch). So much so that I wondered at the beginning of the year if this government would fall before making any significant contribution to that strategy (double ouch).

“SR&ED’s big. SR&ED matters. But it’s also a value statement of where we as a country want to go.”

But here we have it, as it was long foretold, the SR&ED review. So why is this important, what might it accomplish, and how high is our government trust battery right now? Let’s take those in order.

As Bergen notes, the Scientific Research and Experimental Development tax credit is a $4 billion program run through the Department of Finance that services 15,000-20,000 businesses annually—that’s more than double the total superclusters commitment each year. So while not the alpha and omega of innovation policy, meaningful change to such a massive program can drive impact.

Adopting some of the broad patent recommendations might encourage the creation and retention of intellectual property (IP) that comes from (R&D), contributing to our export and scaling issues, as well as longstanding branch plant woes. CCI has recommended a bunch of other SR&ED changes as well.

As for the trust battery? Throughout the conversation, Bergen notes several other government initiatives and promises that have either floundered or died on the vine (like SR&ED’s direct investment counterpart the Canada Innovation Corporation). At times he comes across as someone viewing SR&ED reform as the last, best hope for policy progress from this government. That doesn’t mean it will arrive any time soon: the review is set to end April 15, which means any proposed reforms will miss this year’s budget, likely to arrive in 2025 at the earliest.

One fix at a time, I guess. Let’s dig in.

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The BetaKit Podcast is hosted by Douglas Soltys & Rob Kenedi. Produced & edited by Kattie Laur. Feature image courtesy Justin Trudeau via Flickr.

Douglas Soltys

Douglas Soltys

Douglas Soltys is the Editor-in-Chief of BetaKit and founder of BetaKit Incorporated. He has worked for a few failed companies and written about many more. He spends too much time on the Internet.

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