We do have some of the most lucrative tax credits for industrial research and development and business research and development, but I think one of the shortcomings of the system we have is the fact that these tax credits are not refundable. That means if you're making investments in R and D, you don't get the tax credit necessarily, or the credit is credited against profitability--and there's a good reason for that: you want to show that the R and D is being commercialized well. The problem is that in innovative companies, particularly in economic times like this, they're investing far ahead of their profits and are unable, at the time they need the money, to take advantage of that tax credit. In fact, in some cases they build up vast resources of these tax credits--billions of dollars of tax credits in the case of some companies--that they can't exercise, but it makes the company extremely attractive as a takeover bid.
Also, there are companies that do a lot of research in Canada but don't take advantage of this tax credit because they are U.S.-owned companies. With the consolidated reporting for tax purposes in the United States, unless the tax credit is refundable, it is no incentive for an American-based company to exercise those tax credits in Canada. We're talking about one of the differences in industrial R and D. The tax credit should be encouraging innovation on the part of all companies here, but a very large segment of our industry is owned by U.S. interests, and those tax credits are meaningless for a number of those companies.
So refundability is an issue. We've been pushing for that for many years, as have most of the 43 associations in our manufacturing coalition. What we run up against is not so much the argument that this is too expensive. In fact, analysis by the Department of Finance shows that there's actually a payback to the tax credit. Frankly, I think the real argument, apart from the fact that the finance department never wants to change anything, is that the tax credit is set up to ensure that product will be commercialized; therefore, it's a credit against profit, rather than given on a refundable basis. But I think there are very compelling reasons for that being done, particularly when companies that are making these investments today need cash, which is exactly what the problem is today.