Thanks, Rainer.
As Rainer said, I'm with BIOTECanada. I'm Peter Brenders, the president and CEO.
On behalf of our members, we wrote to ministers Clement and Flaherty in December when the crisis was starting and suggested a three-point plan that we could put in place to sustain research and development in Canada, to stimulate new investments and new financing, and to support domestic jobs--three points that broadly will serve the biotechnology interests but will also serve the broader S and T interests of this country.
The first recommendation is help companies monetize tax losses. As Dr. Engelhardt mentioned, companies spend heavily on R and D, much more than revenue. A lot of times in their early development stage, they accumulate substantial tax losses. They look forward to the day they get to claim these tax losses. But we have a challenge of getting there.
Our recommendation is to grant a loan against these tax losses; use the tax losses as collateral, in a sense. We could use BDC as an entity to be able to flow capital to companies for a short term for them to spend on R and D. You can create limits on that. We're recommending that it be limited to the early-stage R and D companies that are spending more on R and D than they get in revenues, or revenues less than $10 million. You keep it focused on those emerging companies and you can create limits in terms of the amount of a loan they can apply for. You make it a no-payment, no-interest loan for two years and then amortize it over five years. It's a way to put capital into companies and keep those jobs going; stop the layoffs in that area.
We've talked about the second area in terms of new financing and we're suggesting we implement a capital gains exemption on new direct investments into companies that are doing R and D. There's no immediate cost for the government up front, potential opportunity cost down the road when the success is there, but again it puts money into the companies and creates a competitive advantage for a science-based industry.
The third recommendation is to sustain that R and D in Canada. Keep that business case that we have for Canadian R and D. We currently have an R and D tax credit program, the SR and ED program. I'm sure you're all aware of it. There is a limitation in the refundable credits. The refundable credits are a great program, but they're limited to Canadian-controlled private corporations. They're a very small subset of our R and D jobs. It made sense when it was put in place in 1985, back before free trade and all the policy atmosphere then. It makes no sense today. It's not about the ownership status of a company, it's about the Canadian jobs. Our recommendation is simply to eliminate that restriction, that CCPC, the canadian-controlled private corporation restriction. Allow all companies investing in R and D in Canadian jobs to benefit equally under the terms of the program.
We're putting forward those recommendations with two things in mind. One is that we have an urgent problem. We can't afford to have the industry decimated by the credit crisis. Too much has been built into these operations to get them into a commercialization cycle. The second one, and I'll close with it, is that we're dealing with a global landscape. These jobs are very portable.
We put in here the Globe and Mail cartoon from last week that talks about Canadians classically as hewers of wood and drawers of water. In the world of R and D, we run the risk of just simply exporting our IP as we've exported raw natural resources in the past. Our goal is to make sure that we create an environment, that we capture that value in Canada.
We see countries like China announcing $9 billion for emerging tech this week; the U.K. creating a $1.3 billion pool for investment in emerging tech; the U.S. dedicating 3% of GDP for growth and innovation; EU committing more than $47 billion for SMEs; Taiwan creating $2.18 billion in venture capital for their biotech. It goes on and on as countries around the world are investing and it makes it incredibly attractive for our emerging technologies to simply pick up and leave. That's not the goal we want in Canada.
We'll just close with that. We think Canada has a competitive advantage. We can compete globally in this space. We just need the tools to make sure we are globally competitive.
Thank you.