Thank you so much.
Good morning, Chair and members of the Standing Committee on Finance. I thank you for the opportunity to present today on the pre-budget consultations in advance of the 2023 agenda.
My name is Nick Schiavo, and I am the director of federal affairs at the Council of Canadian Innovators.
CCI is a national business council representing 150 of Canada's fastest-growing technology companies. Our members are headquartered here in Canada, employ north of 52,000 employees across Canada and are market leaders in the sectors of health, clean tech, financial technologies, cybersecurity, AI and more.
Following the release of budget 2022, CCI celebrated the strong investments in Canadian innovation, but we worry that without proper follow-through, we risk seeing these investments fail to stimulate the economic growth that is so desperately needed right now.
I'll be honest: It is a tough time right now to be a Canadian tech company.
Our most promising domestic firms, those that should be scaling up and finding new markets, are up against major challenges that pose a real threat to their ability to operate. From an impenetrable procurement system to rising inflation to a talent crisis to uncertainty in global supply chains to federal innovation programs that don't meet the realities of the day, technology firms across Canada are fighting to be successful in 2023.
In my remarks today, I want to offer the committee and your colleagues across Parliament concrete recommendations to help Canadian scale-ups grow. In particular, I would draw your attention to the need to develop a procurement strategy for SMEs, update and enhance the SR and ED tax credit, address our high-skilled talent shortage, create new frameworks for IP, study the impacts of negative FDI and bolster our cybersecurity industry.
I'll expand briefly on each of these.
In 2023, federal procurement just isn't working. Facing an overly complicated system, too many Canadian companies opt to sell their products and services to other countries, resulting in less economic activity for Canadians. For Canada to better leverage the capacities within the country, we need a federal procurement strategy that shelters decision-makers from downside risk, allowing them to pursue innovative technologies with enormous upside potential.
For years, the scientific research and economic development tax credit, or SR and ED, has been a hallmark of Canada's approach to spurring innovation. CCI was pleased that in the last budget, the government committed to a comprehensive review of SR and ED to ensure it's fit for purpose.
Now we need to see that review process begin and consultations with Canadian SMEs take place. CCI has led the way in shaping the future of this nearly $4-billion program with a comprehensive report that offers clear recommendations to modernize, streamline and enhance SR and ED. We're calling on the government to reform SR and ED for Canadian scale-ups and bring more accountability to this program to ensure funds are going to domestic firms instead of foreign multinationals.
On talent, it's now estimated that by the end of 2025, employment in the digital economy will reach 2.26 million, or roughly 11% of all employment in Canada. This growth will only trigger demand for additional skilled professionals, and the need of Canadian companies to attract, generate, and retain top talent has never been greater.
Building on CCI's dedicated “Talent & Skills Strategy”, we are calling on the government to implement a high-potential tech visa to increase labour density of skilled talent and accelerate funding for Canadian businesses that develop upskilling and retraining programs to enhance the domestic workforce.
Last year, the government announced the creation of a Canadian innovation and investment agency designed to target Canada's core innovation challenges. While we're pleased to see movement towards tackling Canada's low productivity and R and D, public innovation programming must prioritize freedom-to-operate strategies that complement a company's intellectual property and data activities. The government should implement its announced innovation policies, and institutions like the agency, with an outcomes-based lens that encourages greater business expenditures in research and development, also known as BERD.
When it comes to foreign direct investment in 2023, the prevailing sentiment within many funding agencies is that luring foreign multinational firms will deliver new jobs. Unfortunately, these programs and economic plans can have major negative consequences for the labour market and IP ownership of Canadian firms. In today's intangible economy, when a large multinational opens a satellite office to hire in-demand tech talent, there's a negative impact on local technology companies.
These negative economic repercussions must be accounted for at the outset of policy development and strategic decision-making. As such, we recommend that the government study the negative spillovers of FDI in the technology sector, such as the impact multinationals have on wage inflation and the effects this can have on smaller scaling companies that are hungry for talent. Understanding these impacts will empower the government to adapt their net benefit review process for foreign investment so that it is better aligned with the needs of the intangible economy.
Finally, domestic capability in cybersecurity is a precondition for our country to remain safe and sovereign in the age of digital threats. If we are not suppliers of cybersecurity solutions, Canada is fully reliant on external actors, vendors and countries that have no public accountability to Canadian citizens to design the systems that protect us. In the next national cybersecurity action plan, we urge the government to focus on building domestic partners, developing cyber-testing streams for co-developed cyber solutions alongside industry and addressing the shortage of cyber talent.
To conclude, CCI is pleased to see the government investing in Canada's innovation ecosystem. To ensure that these investments have the maximum impact for our shared prosperity, we need to implement these policies in the most effective and strategic way possible to create prosperity for all Canadians.
Thank you. I look forward to your questions.