In its 2012 budget, the federal government proposed significant changes to the SR&ED and tax credit, including: · Reduction of the general rate for non-CCPCs from 20% to 15%; · Reduction of the proxy used to claim overhead expenditures from 65% to 55% of the salaries and wages of employees who are engaged in SR&ED activities; · The profit element will be removed from arm’s length third-party contracts for the purpose of the calculation of SR&ED tax credits; · Elimination of capital from the base of eligible expenditures. Canadian Manufacturers & Exporters has strong concerns with the negative impact these proposed changes will have on Canada`s R&D performance. Given that: · The manufacturing sector accounts for more than half of all business expenses in R&D in Canada year after year; · Manufacturers account for roughly half of all SR&ED claims every year; · A strong manufacturing sector is crucial to bridge product invention, prototyping and mass production; · The pool of unused credits prevent many companies from actually access the credits and reinvest them in R&D; · R&D in manufacturing requires substantive capital investments in buildings, lands, machinery and equipment; · A lower proxy amount to claim overheads will eventually make many companies use the traditional method to claim labour expenditures, which will result in more complexity in the claim process and add significant administrative burdens on both businesses and CRA auditors; · Make the CRA respect their mandate to administer the program without changing the rules governing the eligibility of activities, and make sure efficient processes are in place so that less confusion takes place in the interpretation of current rules. Canadian Manufacturers & Exporters recommend to the federal government to: - Compensate large companies for the loss incurred as a result of the ITC reduction from 20% to 15% with a partially refundable tax credit. - Expand refundability to the unused R&D tax credits so businesses can actually have access to these funds and invest it in future R&D projects. - Provide an accelerated depreciation rate for capital expenditures associated with R&D, including M&E, buildings and lands, using the ACCA model. - Review the reduction of the proxy used for labour in light of the increased complexity and administrative burdens this measure will have on business cost of compliance and on the Canada Revenue Agency. - Exclude the proposed changes to SR&ED from the second Budget Implementation Bill and include them in a separate Bill, so that this important issue gets the attention it deserves. Given the huge impact these measures will have on Business R&D in the future, it is critical that the government does not rush the implementation of these changes in a broad budget implementation Bill, but rather in a separate legislation of its own.

Please provide the name of your company when you saign the petition (in the section 'comments',  and send us an email at policy@cme-mec.ca if you wish to receive our updates on the SR&ED tax credit. Thanks!

Sponsor

Links