Flaherty’s Decision to Cut SR&ED Tax Credit, Just Wrong!

By: BeneFACT Marketing in Uncategorized

July 18th, 2012

Jeffrey MacIntosh a Toronto Stock Exchange professor of capital markets at the Faculty of Law, University of Toronto said it well in his recent article in the Financial Post.

“Ill Advised” is what MacIntosh called it, arguing that many of the 20,000 CCPCs taking advantage of the SR&ED tax credit are early-stage firms that reside in what is often called the “Valley of Death” — the capital-starved region sandwiched between government-financed basic and applied research and later-stage private funding by angel investors, venture capitalists, and strategic partners. For many of these seed-stage firms, the SR&ED is the only available source of external funding. Any reduction in the SR&ED will inevitably increase the number of carcasses littering the floor of the Valley of Death.

MacIntosh also disparages the comparative studies between direct assistance and indirect assistance which rely heavily on a study by the federal Department of Finance which found that within five (5) years of incorporation, only 2% of SR&ED recipients grow into large firms that still performed R&D. However, no comparative growth rates are presented for firms receiving direct assistance. Moreover, the pool of firms featured in the Department of Finance study were incorporated in the period from 2000 to 2004 — immediately following the bursting of the tech bubble in 2000. As tech business failures were generally higher in this period, the data relied on is unlikely to be a good proxy for normal growth rates of SR&ED firms. 

Don’t let your tax credits go to waste. Contact us today for more information on how BeneFACT can maximize your SR&ED claim.