Government incentive programs set for major shakeup

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By Francis Moran

The eyes of the Canadian commercialization ecosystem will be focused sharply on Toronto and Ottawa this week as the Ontario and federal governments bring down new budgets that are expected to considerably reshape broad programs of industrial, research and business incentives in each jurisdiction.

At the federal level, where the budget arrives Thursday, the main concern will be around the future of the Scientific Research and Experimental Development tax credit, a widely used program that accounts for well more than half of Ottawa’s annual $7-billion support for research and development. More than 24,000 companies every year underwrite at least part of their operations through this refundable tax credit that gets paid out whether the company is profitable or not. The fear is that the federal government will follow the advice of the Expert Panel Review of the Federal Support to Research and Development, a task force that suggested SR&ED be scaled back and the savings redirected into more direct funding of research.

A second major issue that may be addressed in Thursday’s federal budget is the role of national research institutions, like the National Research Council and its Industrial Research Assistance Program, and funding bodies, like the Natural Sciences and Engineering Research Council of Canada and the Social Sciences and Humanities Research Council. In an era of sharp government deficits and belt-tightening, there is a great deal of trepidation that support programs that have been relied upon for years will disappear entirely or be practically unrecognisable in their new, post-budget format.

In Ontario the debt situation is even more grave and a provincial government must balance the urgent need to reduce spending with an equally acute requirement to foster economic growth. Tuesday’s budget may contain changes to the popular Interactive Digital Media Tax Credit, a program that closely parallels SR&ED in its reimbursement of eligible labour and equipment costs.

In our Commercialization Ecosystem series, we looked at several of these ways in which governments seek to support the bringing of technology to market. While opinion varies widely about the role of government and the effectiveness of various government programs and institutions, there is no doubt that there is a very heavy reliance on these structures. In recognition of this, we will be featuring two commentaries this week in the immediate wake of the provincial and government budgets. Written by Terry Lavineway, director of business incentives at the chartered accounting firm Welch LLP, the two commentaries will detail changes to government incentive programs and explain what they mean to entrepreneurs and investors.

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