Thank you, Mr. Chair.
Thank you to the panellists for inviting us.
ITAC represents the ICT sector. In our case we represent over 325 companies across Canada, and 80% of our members are what you call small and medium-sized businesses.
With respect to the jobs, growth, and innovation, just to make a point we represent about one million jobs, direct and indirect, in the ICT sector. The growth in revenue was about $155 billion, growing at a 5% rate and outpacing the overall economy.
On innovation, I would underscore that the total private sector spending is about $4.8 billion and it is about five times the second-largest, which is the pharmaceutical.
I am very pleased to be here because the main priorities of ITAC are very much in line with this topic. One of them is driving the adoption of technology and productivity in the country. The second is driving innovation and competitiveness in the technology sector.
We did submit a pre-budget submission. We had several recommendations, but given today's discussion, I'll focus on the three that capture the area of tax, R and D, and finance.
The very first one is the venture capital action plan. ITAC was extremely pleased with the announcement that was made by the government on this area: leveraging a $400-million allocation and turning it to $1 billion by leveraging the private sector. However, the process of getting it in play has been very, very long, and companies in our sector are struggling.
The start-ups are in micro-electronics. These complex software areas are particularly challenged by this delay when you have other issues, like the removal of SR and ED. Our recommendation to the government on the venture capital action plan was that we needed to get this moving and engage the sector recipients in this case to not only design but also implement how it needs to be allocated across various sectors. So we are looking forward to further action in this area.
The second area I want to cover concerns indirect tax measures to support innovation. In the budgets of 2012 and 2013 the government began to remove the indirect tax credit, which was known as SR and ED, from research and development and made some announcements on direct measures.
Consultation is under way on the direct funding initiatives, and we expect these will be rolled out later in 2014. This delay is hurting the industry quite a bit, particularly on advanced manufacturing, where funding is required now.
We continue to believe that indirect measures like SR and ED are one of the best ways to continue to support the Canadian ICT sector, in large part due to the small businesses. This is a predictable source of funding to drive the innovation.
One thing I would note is that the ICT sector jobs are highly migratory. If we do not have the proper instruments in place, these high-paying jobs and the innovation we're seeing in the country may not be here for long.
So our recommendations, as submitted in the budget document, state that we do need to revisit the SR and ED, and in the meantime the government should continue to track the changes and what the impact has been. Our recommendation was to take the qualified pool balances from 15% to 17% or return capital expenditures for R and D.
Finally, we need to have the tools that clearly measure the impact of these programs to support the research and development.
The last item I will cover today is the adoption of innovative technology. One of the key ways to make Canada promote the innovation is to support the adoption and use of technology in business. This is fundamental to improve productivity. The Canadian companies continue to under-invest in technology. Canada's current rate for ICT investment per worker is only at 53% of the United States.
To address this, the Canadian government needs to be the champion in promoting the benefits of adopting technology.
There are also some specific initiatives to consider here. It can be difficult for small and medium-sized businesses to get started on technology projects when their main priority is just making a go of it.
There was a government program called DTAPP, a digital technology adoption pilot program, which is winding down. I believe we should reinstate that program in some fashion and call it the generation two of the program and engage the industry to not only design but also to implement that program in the field.
The adoption of innovative technologies is key to Canada's ability to grow and prosper, and we need to take some action now.
In closing, research and innovation is fundamental not only to the ICT companies' growth, but also for all sectors of the Canadian economy to fully benefit from the adoption of new technologies.
Thank you, and I look forward to your questions during the Q and A session.