Government dismissed OECD recommendations on SR&ED, CME says

The government should have listened to the Organization for Economic Co-operation and Development’s (OECD) 2012 Economic Survey for Canada, according to Canadian Manufacturers & Exporters (CME).

 The suggestions outlined in the report regarding the Scientific Research & Experimental Development Tax Credit (SR&ED) were not included in the government’s 2012 federal budget, CME said in a statement.

“The SR&ED tax credit program is one of the reasons there is a lag in R&D spending,” said CME’s director of policy for Manufacturing Competitiveness and Innovation, Martin Lavoie in the statement. “Canada remains a weaker performer when it comes to business investment in R&D as a result of the imbalance between support to small and larger companies.”

OECD’s report found that the business sector devotes “only about one per cent of GDP to R&D, compared with two per cent in the U.S. and more than 2.5 per cent in Japan, Korea and some of the Nordic countries.”

But the CME says the government hasn’t taken any steps to fix the imbalance between support to small and large firms under the SR&ED tax credit. Instead, the organization argues that the government proposed measures that will widen the gap between small and large firms.

“The government should listen to the OECD when they ask to maintain the SR&ED tax credit,” said Lavoie. “While no one disagrees that more direct support can be an effective tool to make businesses spend more in R&D, it should be done complementary to the current SR&ED tax credit, not at the expense of it.”