Last month, The Financial Post published an article in the Comment section that caused quite a stir in the SR&ED tax credit community. In Too Much Support for Small R&D, John Lester discusses his belief that the, “35% enhanced Scientific Research and Experimental Development credit available to smaller firms fails to deliver a net benefit to society”. He also explains:
Many in the industry agree that although the system is definitely not perfect. That being said, it shouldn’t necessarily be changed to make it more difficult for smaller firms. Bringing the SR&ED benefits percentage down for small and medium-sized businesses jeopardizes their chance of survival, which is a scary thought. These kinds of businesses are extremely important to the Canadian economy. In one Statcan summary, it was mentioned that SMEs account for 54.2% of the GDP. The SR&ED program puts dollars back into the pockets of these smaller companies that may rely on benefits to continue producing products.
SMEs also tend to serve niche sectors of industry that are not generally covered by large industry. These niches could suffer greatly with the loss of tax credits for their R&D activities. It has been said that the program supports small business because they create core economic infrastructure, employ local people and are themselves parts of local communities in a broader sense.
Everyone knows that the SR&ED program (like most programs), is not perfect. It is ever in the process of change and adjustment. However, taking a benefit away from a sector that may need it most is not necessarily the answer and may lead to greater consequences on the whole than simply saving a few dollars.