Evidence of meeting #87 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was capital.
A video is available from Parliament.
Conservative
NDP
Peggy Nash NDP Parkdale—High Park, ON
You mentioned the Jenkins report. They recommended that there be a study to determine the appropriate rate for the proxy method of calculating credits. Has that been done? Their recommendation was that there be a calculation of a percentage of labour rates.
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
No specific study per se was undertaken.
What I would note is that companies have the ability to either use the proxy amount or claim their actual overhead expenditures. While the proxy amount is being gradually reduced, companies retain the option of tracking actual expenses and claiming whichever amount is more advantageous to them.
It's also unlikely that one proxy amount would cover or reflect all industries. To establish one that is unique may not have been a profitable undertaking. A proxy, again, is a simplified method. Canada is actually the only country that offers SR and ED claimants the ability to use a proxy amount.
NDP
Peggy Nash NDP Parkdale—High Park, ON
In making this decision, was there any kind of study undertaken? What was the evidence base on which the decision was made?
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
Certainly we've seen the preponderance of R and D claimants using the proxy method to an extent that might suggest it is overly generous.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Is there any of that data or information you can share with the committee, or that can be tabled with the committee, even at an aggregate basis?
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
There is no specific data that I can share on that, no.
NDP
Peggy Nash NDP Parkdale—High Park, ON
Is there any work that's being done in terms of the impact of this change? Do we know whether it's likely to have any impact on investment or any impact on jobs?
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
It's important to realize that with the changes that are being proposed regarding the SR and ED tax incentive overall, there's a spending side as well. Budget 2012 sets out $1.1 billion in new spending for R and D and also makes available $500 million for venture capital.
It's important to recognize that the Jenkins panel suggested that Canada's balance between direct and indirect spending was skewed too far to the side of indirect support through the tax system. The plan that's laid out in budget 2012 rebalances it by removing some of that tax support in favour of putting the direct spending in place.
NDP
Peggy Nash NDP Parkdale—High Park, ON
I don't believe the direct spending has been set up or earmarked. Can companies tap into that yet?
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
The program spending is set out in budget 2012. I'm not as familiar with the process or how it works through its implementation.
Conservative
The Chair Conservative James Rajotte
Is there anyone who can address the issue of program spending?
I assume we're talking about IRAP and other measures.
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
I can certainly give you a rundown of some of the programs that will be—
Conservative
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
Absolutely. Let me go through some of them.
We have—
November 1st, 2012 / 3:40 p.m.
Conservative
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
It sets aside $500 million for venture capital. Those funds have not been allocated yet, but work is being done on the implementation of those funds. There's $400 million to increase private sector investment in early stage risk capital, and $100 million for the Business Development Bank of Canada to support venture capital.
In terms of increasing and improving support for business innovation, there is $110 million annually to the industrial research assistance program, known as IRAP. There is $143 million, over two years, for business-driven research collaboration. That would include items such as business-led networks, centres of excellence, industrial research and development internship program, for example. With respect to refocusing the National Research Council as itemized in budget 2012, there's $67 million, in 2012-13, to help it refocus on business-driven industry applied research.
Conservative
Liberal
Rodger Cuzner Liberal Cape Breton—Canso, NS
On page 380 of the budget, you identified the savings that will be had from the reduction in the percentages. With regard to the amounts projected, obviously you have to have some idea of how many tax filers there are.
Could you share with the committee as to how many tax filers there are who would access and utilize this?
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
At the aggregate level, there's in the range of 25,000 tax filers per year who make use of the R and D, the SR and ED tax incentive.
Liberal
Rodger Cuzner Liberal Cape Breton—Canso, NS
Do you have some type of a geographical breakdown as to where the bulk of those filers are from? Would you have that kind of information?
Director, Business Income Tax Division, Tax Policy Branch, Department of Finance
The tax filing data is not ideally suited to that, in that many companies are multi-jurisdictional, so it doesn't necessarily give a good indication of which province the activities occur in.
The Jenkins panel may have a regional breakdown. We can check for that.