Innovation Canada: A Call to Action

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Innovation Canada: A Call to ActionFigure 3.4 Envelope Expenditure, by Type of Recipient,Total Direct Expenditure, 2010–11, and SR&ED Tax Credit, 2007Total Direct Expenditure, FY 2010-11 SR&ED Tax Credit, 20074%3%12%21%26%11%For 2010:About 81%of allexpenditures(direct andindirect)are projected togo to business.56%40%6%21%Small businessesLarge businessesResearchers, fellows and studentsat universities and collegesUniversities and collegesCanadian non-profitsOtherNRC institutes and other federallyperformedR&DAbout 86% ofthis amountis projected tobe deliveredthrough theSR&EDprogram and14% throughdirectprograms.Small CCPCsLarge businesses(CCPCs and non-CCPCs)Other (small non-CCPCs andCCPCs in expenditure limitphase-out range)Source: Based on figures provided by departments and agencies.program expenditure has increased by over$550 million from 2007–08 to 2010–11(Figure 3.1), the sectoral allocations haveremained relatively similar over that period.Indirect expenditure. The estimatedallocation of the SR&ED tax expenditure isspread more evenly across sectors and, aswould be expected given its base ofcalculation, mirrors more closely the sectoraldistribution of Canada’s total businessexpenditure on R&D (BERD). For example,approximately 56 percent of SR&ED creditswere associated with goods producers, agroup that performed about 58 percent ofBERD (the services shares are thecomplements).It should be noted that the program expenditurein Figure 3.5 cannot be interpreted simply asfunding a portion of the BERD total. While someprograms transfer cash directly to business —notably the refundable amounts from theSR&ED program and the various grant andcontribution programs (some of which areintended to be repaid) — other directexpenditure is by federal entities such asNRC or goes to academic institutions andnot-for-profits.Envelope Expenditure by ProvinceIt was difficult on the basis of available data todetermine accurately the geographic distributionof SR&ED tax credits. For example, from 2000 to2007, some 40–50 percent of the SR&ED creditswere claimed by multi-jurisdiction firms, buttypically reported by location of head office. As aresult, it was not possible to determine preciselyin which region these firms are performing theirSR&ED activities, and consequently to draw an3-10
Overview of Programs to Support Business R&Doverall conclusion about the distribution ofSR&ED claims by region. Subject to theseimportant caveats, the Panel’s analysis has shownthat, for the years 2000–07, the estimatedaverage distribution of SR&ED tax expenditure forthe firms operating in a single jurisdictionappears to correspond closely with the averageprovincial distribution of BERD — that is, mostlyin Ontario and Quebec, with moderate amountsin the four western provinces and some in theAtlantic provinces.The distribution of the direct expenditure total ismore nearly in line with provincial populationshares, 6 though with a significantly largerproportion in the Atlantic provinces (about12 percent of direct expenditure comparedwith slightly more than 7 percent of Canada’spopulation) and somewhat less than proportionalper capita in British Columbia, Alberta, Manitobaand Ontario.Envelope Expenditure by Activity SupportedThe great majority of R&D performed by businessis for “experimental development” (StatisticsCanada 2009), which the Frascati Manual definesas “systematic work, drawing on existingknowledge gained from research and/or practicalexperience, which is directed to producing newmaterials, products or devices, to installing newprocesses, systems and services, or to improvingsubstantially those already produced or installed”(OECD 2002, p. 30). Allocation of the SR&ED taxcredit, averaged over 2000–07, is estimated to bemostly in support of experimental development.Direct expenditure programs were more evenlyspread, with 38 percent of 2010–11 expenditureestimated to be in support of experimentaldevelopment, a roughly equal amount of35 percent for applied research, 13 percent forbasic research and 11 percent for“commercialization” (planning, marketing andproduction support, which are not eligible forSR&ED credits). Three percent of direct supportwas not categorized.When direct and indirect programs arecombined, it is estimated that the majority offederal support for business and commerciallyoriented R&D is directed to experimentaldevelopment. This activity is usually very close tothe market and therefore is less conducive tocollaboration and partnership with other playersin the innovation system. There also appears tobe less spillover to the economy at large fromthis “close-to-market” R&D, the benefit ofwhich is likely to be more fully appropriated bythe R&D-performing business than would be thecase for basic and applied research, which isusually more widely shared and also subject tomore wide-ranging application.6 With the exception of Ontario and Quebec, provinces have a slightly smaller share of BERD relative to their share ofCanada’s population.3-11
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Innovation Canada:A Call to Action
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Dear Minister,Please find attached
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Innovation Canada: A Call to Action
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Page 35 and 36: The Context of the ReviewChapterThe
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Page 69 and 70: Vision and PrinciplesChapterVision
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Page 77 and 78: Program Effectivenessfull spectrum
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Page 101 and 102: Program Mix and Designcapital costs
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Page 111 and 112: Filling the Gapscompetitive levels,
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Filling the GapsThe budgetary impli
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Filling the GapsSuch concerns are i
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Filling the GapsAngel InvestmentAt
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Filling the GapsWith the foregoing
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Filling the GapsBearing this in min
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Leadership for InnovationChapterLea
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Leadership for InnovationThe approp
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Leadership for Innovationinnovation
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ConclusionChapterConclusion9We are
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Programs in the ReviewAnnexPrograms
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Programs in the ReviewDepartment or
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