Innovation Canada: A Call to Action

Overview of Programs to Support Business R&DFigure 3.3 Program Envelope, by Form of Support, 2010–11 a5%1% 6% 1%Tax credit support18%70%Non-repayable grants andcontribution programsRepayable contributionprogramsProcurement programs(contract R&D)Federally-peformed R&Dexpenditure – NRC institutesFederally-peformed R&Dexpenditure – otheraAmounts do not add up due to rounding. The value of tax credit support is a projection for the 2010 taxation year.Source: Based on figures provided by departments and agencies.the academic sector (including students),21 percent to NRC institutes and other federallyperformed R&D, 12 percent to Canadian nonprofits,and 3 percent to “other” recipients(including provincial and municipalgovernments, foreign performers and otherCanadian performers). The breakdown ofindirect expenditure in 2007 — the latest yearfor which a breakdown by recipients is available— was as follows: 56 percent to largebusinesses, 40 percent to small Canadiancontrolledprivate corporations (CCPCs), and4 percent to other businesses, that is, smallnon-CCPCs and CCPCs in expenditure limitphase-out range. 5Envelope Expenditure by SectorFigure 3.5 (at the end of this chapter) lays outthe allocation of both direct and SR&ED taxcredit expenditure across all goods and servicesproducing industries. In the case of the directprograms, a sectoral breakdown is providedfor the $1.5 billion in 2010–11 expenditure.In the case of the SR&ED tax credit, the sectoralallocation of about $3.3 billion is for 2007,the most recent year for which a sectoraldistribution is available. The following are somekey observations around the envelopeexpenditure by sector.Direct expenditure. Direct expenditureprograms, in total, are heavily orientedtoward goods-producing industries (about72 percent), reflecting primarily a focus onmanufacturing. Approximately 27 percentof direct spending programs support servicesproducers, notably the professional, scientificand technical services subsector (about12 percent) and information and culturalindustries (about 5 percent). While direct5 The definitions of small and large businesses used by the SR&ED program and the direct programs are not fullycomparable. In the case of many direct programs, the business’s number of employees is used to define the size of thebusiness. For the purposes of the SR&ED program, a “small CCPC” is one with prior-year taxable income of $500 000 orless and prior-year taxable capital of $10 million or less. These companies receive a refundable tax credit on their first$3 million of eligible expenses.3-9