Thank you very much.
Thank you to the committee for inviting me. I will try to say a little bit about the global competitive landscape of what's happening and then focus on three recommendations, with time permitting.
In general we see Canada continuing to do well relative to the rest of the world. At the same time we are constantly looking at Canadian productivity and are seeing tremendous challenges in our competitiveness. Our view is that innovation is the tool that will help Canada improve our productivity, and we truly think that is the essence of how Canada will become globally competitive.
When we look at the global landscape we see many countries very actively and thoughtfully approaching.... As Mr. Gupta said very well, global R and D today is very competitive, and we think it's time for Canada to really think through a number of issues: balance of direct and indirect support models for business, refundability of tax incentives, patent boxes, small versus big business strategies, capital expenditures and how they are treated, as well as the links between academia and industry.
Just to give some data points—and these are very real and very recent—governments at just the state and local level in the U.S. are spending $80 billion annually in business support. In the EU over the next seven years the European Parliament has allocated $500 billion euros in business support. In that, there's a $70 billion euro program just to promote innovation.
There's a new special economic zone in China just announced a couple of weeks ago, and similarly just a couple of weeks ago Spain announced that they were making their new tax credit—the classic R and D tax credit—fully refundable.
We've seen in the U.K. both an R and D tax credit and the patent box, and in general we see patent boxes appear all across Europe and, by the way, Asia as well.
Just to list some of the European countries: the U.K.; Netherlands; Belgium; China—not European; France; Hungary; Ireland; Liechtenstein; Luxembourg; Spain; and Switzerland. That's just to give you a flavour of how common these are becoming.
We have seen that incentives in Canada have achieved tremendous results. We can use Ontario as an example with our digital media credit here. It has demonstrated that a government policy and focused incentives can achieve tremendous results, and we're seeing that these are a great tool to attract foreign investment. But we're also seeing a lot more activity in the rest of the world, and we are concerned about Canada falling behind.
Let me focus on three specific recommendations that we've made to the committee. The first one is to encourage foreign investment through full refundability of R and D tax credits.
The second one is spurring the start-up economy with improved financing support and then considering the introduction of the patent box model as is being done in other countries.
Our view is that only full refundability of SR and ED tax credits can achieve the kind of financial result that modern businesses look for, and it is a trend around the world.
I think that we've studied the tax consequences, especially to the U.S. companies, of our current non-refundable SR and ED system and we think that a solution of making it refundable will come a long way.
We clearly think that the B.C. angel tax credit has been a good test and has shown that it's a good way to promote innovation and get companies launched and moving in the right direction. We think that more of that kind of angel tax credit modelled on the B.C. tax credit would be a very good way to get these companies ready for venture capital when it flows.
On the patent box I've listed the countries that have already done this. Patent boxes are not complicated, but it is a way to make companies hold their IP in Canada in return for preferential tax treatment. We think around that IP you will see more innovation and more jobs.