Ottawa embraces notion that governments can pick innovation winners and losers


dumpthemonarchy
#1
Just more corporate welfare from the taxpayer. Tax credits are tax expenditures. One commentator said R&D tax credits are a like kid complaing that he would be a better hockey player with a more expensive stick. Ottawa cannot pick economic winners.

CBC has a crap search engine. You cannot find past stories on shows like Power and Politics. I saw on P&P an economist saying tax credits cost the budget $100 billion each year and many are useless like giving a millionaire at age 65 a deduction-he doesn't need it. Departments don't put them on the block each year because they are not a cost like programs so they go on for decades. The R&D tax credit is a classic one. It has been shown not work very well, but like most the, they never end.


Ottawa embraces notion that governments can pick innovation winners and losers - The Globe and Mail



Ottawa embraces notion that governments can pick innovation winners and losers

BARRIE McKENNA | Columnist profile | E-mail (external - login to view) OTTAWA— From Friday's Globe and Mail

Published Thursday, Mar. 29, 2012 9:31PM EDT

Last updated Thursday, Mar. 29, 2012 9:58PM EDT

Stephen Harper’s Conservative government is delivering on its vow to fix Canada’s failing innovation model with a decidedly un-conservative prescription.

Finance Minister Jim Flaherty laid out a significant shift Thursday in how Ottawa funds business research and development – more grants and fewer tax breaks – in a bid to tackle the country’s chronically lagging R&D performance.

In essence, Ottawa is embracing the notion that governments can successfully pick innovation winners and losers. And under this new regime, the winners are more likely to be small businesses than larger ones.
The big question now: Will it work?

The government is cutting what it gives to businesses via its popular R&D tax credit program by roughly half a billion dollars a year, and putting half the savings back into direct grants to companies. Ottawa is also creating a new $400-million venture capital pool, though details are sparse on how the money will be doled out.

“It’s becoming more of a planned economy and less of a capitalist economy,” argued Andrew Dunn, a managing partner and tax expert at Deloitte Touche.

The approach may be politically appealing, Mr. Dunn said, but it’s not clear it will be good for businesses or the economy. He characterized the overhaul as the “single biggest gamble in the budget.”

The government will be hard-pressed to demonstrate how spending less on innovation will result in better outcomes, said Jayson Myers, chief executive of the Canadian Manufacturers and Exporters. The changes, he insisted, will make Canada a less attractive place to produce goods for the global marketplace and discourage multinationals from investing here. “This will hit the top R&D performers the most,” Mr. Myers predicted.

Meanwhile, the bulk of the new federal subsidies will go to small and medium-sized businesses – a favourite recipient of the Conservatives’ largesse.

Ottawa’s R&D tax credits are already much more generous to small, private companies than to large multinationals or public companies. And the budget tilts the balance even more.

The quandary facing the government, however, is that what it’s doing now isn’t working. Canada currently offers some of the most generous tax incentives in the world, but business investment in R&D continues to fall – both in total spending and as a percentage of gross domestic product.

As Mr. Flaherty lamented in his budget speech: “Canada is not keeping up with other advanced economies on this crucial front.”

With a few exceptions, the budget follows the script laid out in a recent federal task force report, headed by Open Text Corp. chairman Tom Jenkins. The report pointed out that Canada invests proportionately more in tax credits (about $3.6-billion in 2011) versus direct grants than virtually all other developed countries.

The answer, according to Mr. Jenkins, is a better balance, with more grants and fewer R&D credits.

Overhauling the Scientific Research and Experimental Development (SR&ED) tax credit will save the government $520-million a year. The main changes include a cut in 2014 to 15 per cent from 20 per cent in the tax credit rate, and a restriction on what expenditures are counted for the credit. For example, capital expenditures – buildings, equipment and product prototypes – will no longer be eligible. The amount of eligible overhead expenses will also be cut.

The 35-per-cent refundable credit for Canadian-controlled private companies remains untouched, widening the relative gap in benefits between large and small companies.

The government insisted the changes would make the SR&ED less complex and easier to administer.
Some of the savings will go to a doubling of the National Research Council’s Industrial Research Assistance Program, which doles out cash and advice to R&D projects by mainly small businesses. The government is also giving the NRC, which runs a network of specialized labs across the country, a one-time injection of $67-million to help it concentrate on “business-driven, industry-relevant applied research” and move away from pure research.

But Ottawa skipped over a couple of crucial recommendations in the Jenkins report. Mr. Jenkins urged Ottawa to make its tax credit scheme simpler and less prone to abuse – problems the changes don’t address. And he insisted they should be revenue neutral.

Instead, the Harper government has delivered an innovation overhaul that saves money. Maybe not so un-conservative after all.
 
taxslave
+1
#2  Top Rated Post
Better learn how taxes work. Tax credits are NOT expenditures.
 
Tonington
#3
Quote: Originally Posted by dumpthemonarchyView Post

The quandary facing the government, however, is that what it’s doing now isn’t working. Canada currently offers some of the most generous tax incentives in the world, but business investment in R&D continues to fall – both in total spending and as a percentage of gross domestic product.

So where is the investment going? Resource extraction. They are changing the tax credits for R&D to move even farther away from larger companies that can access more capital. Any changes to exploration tax credits? Nope. If more investment is tilted towards resources, why would they even expect business investment in R&D to remain stable as a % of GDP. Of course it's going to fall. They're making it (resources) more attractive as an investment, and resources will not even come close to delivering productivity gains that can be achieved with R&D.

Asinine.

It's ridiculous that Harper and Flaherty think that they can drive innovation with grants more effectively than market-driven research funded by tax credits.
 
dumpthemonarchy
#4
Quote: Originally Posted by taxslaveView Post

Better learn how taxes work. Tax credits are NOT expenditures.

That's what economists call them, it's not all my doing.

Someone pays for these credits. They may be called incentives, but they go on forever. Corruption.
 
Cannuck
#5
Quote: Originally Posted by dumpthemonarchyView Post

CBC has a crap search engine. You cannot find past stories on shows like Power and Politics. I saw on P&P an economist saying tax credits cost the budget $100 billion each year and many are useless like giving a millionaire at age 65 a deduction-he doesn't need it.

CBC.ca Player


I had no problem
 
Machjo
#6
Quote: Originally Posted by dumpthemonarchyView Post

Just more corporate welfare from the taxpayer. Tax credits are tax expenditures. One commentator said R&D tax credits are a like kid complaing that he would be a better hockey player with a more expensive stick. Ottawa cannot pick economic winners.

CBC has a crap search engine. You cannot find past stories on shows like Power and Politics. I saw on P&P an economist saying tax credits cost the budget $100 billion each year and many are useless like giving a millionaire at age 65 a deduction-he doesn't need it. Departments don't put them on the block each year because they are not a cost like programs so they go on for decades. The R&D tax credit is a classic one. It has been shown not work very well, but like most the, they never end.


Ottawa embraces notion that governments can pick innovation winners and losers - The Globe and Mail



Ottawa embraces notion that governments can pick innovation winners and losers

BARRIE McKENNA | Columnist profile | E-mail (external - login to view) OTTAWA— From Friday's Globe and Mail

Published Thursday, Mar. 29, 2012 9:31PM EDT

Last updated Thursday, Mar. 29, 2012 9:58PM EDT

Stephen Harper’s Conservative government is delivering on its vow to fix Canada’s failing innovation model with a decidedly un-conservative prescription.

Finance Minister Jim Flaherty laid out a significant shift Thursday in how Ottawa funds business research and development – more grants and fewer tax breaks – in a bid to tackle the country’s chronically lagging R&D performance.

In essence, Ottawa is embracing the notion that governments can successfully pick innovation winners and losers. And under this new regime, the winners are more likely to be small businesses than larger ones.
The big question now: Will it work?

The government is cutting what it gives to businesses via its popular R&D tax credit program by roughly half a billion dollars a year, and putting half the savings back into direct grants to companies. Ottawa is also creating a new $400-million venture capital pool, though details are sparse on how the money will be doled out.

“It’s becoming more of a planned economy and less of a capitalist economy,” argued Andrew Dunn, a managing partner and tax expert at Deloitte Touche.

The approach may be politically appealing, Mr. Dunn said, but it’s not clear it will be good for businesses or the economy. He characterized the overhaul as the “single biggest gamble in the budget.”

The government will be hard-pressed to demonstrate how spending less on innovation will result in better outcomes, said Jayson Myers, chief executive of the Canadian Manufacturers and Exporters. The changes, he insisted, will make Canada a less attractive place to produce goods for the global marketplace and discourage multinationals from investing here. “This will hit the top R&D performers the most,” Mr. Myers predicted.

Meanwhile, the bulk of the new federal subsidies will go to small and medium-sized businesses – a favourite recipient of the Conservatives’ largesse.

Ottawa’s R&D tax credits are already much more generous to small, private companies than to large multinationals or public companies. And the budget tilts the balance even more.

The quandary facing the government, however, is that what it’s doing now isn’t working. Canada currently offers some of the most generous tax incentives in the world, but business investment in R&D continues to fall – both in total spending and as a percentage of gross domestic product.

As Mr. Flaherty lamented in his budget speech: “Canada is not keeping up with other advanced economies on this crucial front.”

With a few exceptions, the budget follows the script laid out in a recent federal task force report, headed by Open Text Corp. chairman Tom Jenkins. The report pointed out that Canada invests proportionately more in tax credits (about $3.6-billion in 2011) versus direct grants than virtually all other developed countries.

The answer, according to Mr. Jenkins, is a better balance, with more grants and fewer R&D credits.

Overhauling the Scientific Research and Experimental Development (SR&ED) tax credit will save the government $520-million a year. The main changes include a cut in 2014 to 15 per cent from 20 per cent in the tax credit rate, and a restriction on what expenditures are counted for the credit. For example, capital expenditures – buildings, equipment and product prototypes – will no longer be eligible. The amount of eligible overhead expenses will also be cut.

The 35-per-cent refundable credit for Canadian-controlled private companies remains untouched, widening the relative gap in benefits between large and small companies.

The government insisted the changes would make the SR&ED less complex and easier to administer.
Some of the savings will go to a doubling of the National Research Council’s Industrial Research Assistance Program, which doles out cash and advice to R&D projects by mainly small businesses. The government is also giving the NRC, which runs a network of specialized labs across the country, a one-time injection of $67-million to help it concentrate on “business-driven, industry-relevant applied research” and move away from pure research.

But Ottawa skipped over a couple of crucial recommendations in the Jenkins report. Mr. Jenkins urged Ottawa to make its tax credit scheme simpler and less prone to abuse – problems the changes don’t address. And he insisted they should be revenue neutral.

Instead, the Harper government has delivered an innovation overhaul that saves money. Maybe not so un-conservative after all.

Another problem I see with such tax credits is taht those involved in R&D are generally better paid than the general population. Not only did they get their education subsidized, something those who for whatever reason did not get a chance to go to university did not benefit from, but now are getting their salaries indirectly subsidized too.

I say scrap such discriminatory tax credits and instead drop taxes altogether, and stop subsidizing higher education too, unless you're going to subsidize it 100%. Otherwise subsidize it 0% and just lower taxes.
 
Liberalman
#7
What's wrong with tax credits?

Tax credits are like coupons as long as you are using it you come out as the winner.
 
dumpthemonarchy
#8
Quote: Originally Posted by CannuckView Post

CBC.ca Player


I had no problem

Thanks.
 

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