Design Engineering

Study: Canada’s R&D subsidies are too rich, require review

University of Calgary report argues that R&D tax incentives for small Canadian firms are too generous by international standards.

November 27, 2014   by The Canadian Press
General research and development slideshow University of Calgary

13-april-NRC-research-360CALGARY — Researchers at the University of Calgary’s School of Public Policy say Canada needs to rethink its research and development incentives.

In a new paper (An international comparison of assistance for research and development), authors John Lester and Jacek Warda say Canada’s R&D subsidies for small firms are high by international standards and their costs likely outweigh their benefits. They argue R&D assistance must benefit society as a whole, not just the companies receiving it.

Through the tax system, federal and provincial governments together pick up nearly 41 per cent of the R&D tab for small firms — well above the maximum 25 per cent rate the study recommends.

The paper says there ought to be a uniform R&D rate for all businesses regardless of age or size, but concede the case for targeted subsidies is stronger for young firms that tend to be more innovative and are more likely to grow.

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It says in theory R&D subsidies should be refundable, but on a practical level there are concerns about lost revenue from larger firms.

© 2014 The Canadian Press

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