Consolidation of Federal Research and Development Incentives
A Proposal for Federal Government Program
DUE 1995-12-15
02 | Description of the Activity to be Restructured
This proposal calls for a consolidation of various Research and Development incentive programs into a single negative-tax benefits to increase effectiveness and efficiency, while eliminating duplication, overlap and redundancy within the Federal Government.
Here are some of the Research and Development programs by the Federal Government.
Revenue Canada's Scientific Research and Experimental Development (SR&ED) program has become very popular since the mid 1980's when it replaced the Scientific Research Tax Credit (SRTC) which was plagued with abuses and fiascoes. Today, the SR&ED program is very well administered with rigorous scientific and financial audits.
National Research Council of Canada operates the Industrial Research Assistance Program (IRAP), and there is also the Defence Incentive Program somewhere in the Federal Government.
Statistics Canada has a reporting requirement on "Research and Development in Canadian Industry".
All these programs, and potentially more, will be integrated into a single "Enhanced SR&ED Program" administered by Revenue Canada with ties to various government departments and agencies who may actually determine the amount of benefits for each portion of the program.
Logistically, a new suffix "RR" for Research will be created in the Single Business Registration Number system for qualified companies and organisations. A single point of entry into the "Enhanced SR&ED Program" will be the revised T661 tax form. The delivery mechanism will be a 2-way monthly installment to spread the benefits in the form of negative income tax. The recipient company or organisation will interact with the Federal Government through direct deposit/payment into/from the bank account as positive or negative cash flow.
The basic portion of the "Enhanced SR&ED Program" will be as follows.
Current SR&ED program by Revenue Canada
"Passive" Investment Tax Credit of 35 %
Confidentiality guaranteed, if so desired
The advanced portion of the "Enhanced SR&ED Program" will be as follows.
Current IRAP program by National Research Council of Canada
"Active" Research and Development funding
The single Research and Development reporting on the T661 tax form will consist of the following.
Current "Research and Development in Canadian Industry" by Statistics Canada
03 | The Restructuring Plan
Phase 1 (1 year)
Revenue Canada to create "RR" suffix for Single Business Registration Number.
Revenue Canada to modify T661 tax form to add the IRAP portion.
National Research Council of Canada's IRAP department to be merged with Revenue Canada's SR&ED department.
Revenue Canada to start reporting Research and Development statistics in T661 tax form to Statistics Canada.
Statistics Canada to eliminate its own "Research and Development in Canadian Industry" reporting.
Some changes in political/legal system may be required in the form of new legislation.
Phase 2 (2 years)
Solicit provincial governments for subscription.
04 | Rationale for Restructuring
The basic philosophy behind this proposal is "absolute simplicity and consistency", eliminating any intermediate process and automating the procedures. Such an approach to achieve total quality and global optimisation is a long-term solution requiring careful planning.
Today, Revenue Canada is actually hiring more auditors for the popular SR&ED program! Financial benefits for the Federal Government will come from restructuring, i.e., reduced head count and paperwork in the bureaucracy. There will be much less complexity and quantity of information mailings, seminars and visits. Staff training and education will be streamlined as well. Expertise on governmental Research and Development will be pooled for maximum effectiveness and efficiency.
From the applicant's perspective, it will become much simpler to prepare for Research and Development assistance, resulting in reduced overhead. This is due to the fact that most companies and organisations applying for the IRAP program, for example, are also beneficiaries of the SR&ED program. With a single point of entry, they will no longer be filling out dozens of different forms and sending out tons of virtually identical reports to different government departments and agencies. They can be incorporated into Revenue Canada's EFILE, electronic tax filing system.
Each piece of information filed to the Federal Government will be marked "Confidential" or "Open" to provide a mechanism for voluntary disclosure to outsiders. Thus, companies and organisations who want to make certain information (e.g. SR&ED spending) available to a Provincial Government (e.g. Statistics Québec) will be able to do so on a voluntary basis in order to avoid extra paperwork. Today, it is not possible due to an inflexible blanket policy of confidentiality.
Once the framework is established, Provincial Governments will be able to subscribe to the program in a modular fashion instead of creating and maintaining their own, as the Government of Ontario is about to do with its own Research and Development incentive. They will fully control the algorithm to determine the amount of incentive, but share the administration and single source of information with the Federal Government.
