R&D TAX INCENTIVE SUPPORT: Canada. Public support for business R&D: the mix of direct funding and tax relief. Fi
R&D TAX INCENTIVE SUPPORT: Canada Public support for business R&D: the mix of direct funding and tax relief
Figure 1. Direct government funding of business R&D and tax incentives for R&D1, 2013 As a percentage of GDP %
Indirect government support through tax incentives
Direct government funding of BERD
Data on tax incentive support not available
0.45 0.40
Indirect government support to business R&D, 2006 (or nearest year, where available)
0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00
12
Tax Incentive Support for Business R&D in OECD Countries – Canada
Trends in government support for business R&D
Figure 2. Direct funding of business R&D and tax incentives3 for R&D, Canada, 2000-13
Tax Incentive Support for Business R&D in OECD Countries – Canada
Design of R&D tax incentive support
Figure 3.1. R&D tax incentive schemes: Canada compared to OECD+ economies, 2015 Features of expenditure-based R&D tax incentive provisions CANADA Instrument: volume-based (SR&ED) investment tax credit Tax credit rate:6 35% CCPCs (up to CAD 3 million), 15% large enterprises and CCPCs (above expenditure limit) Corporation income tax (CIT) rate:7 26.70%, 15.19% (CCPC) (non-targeted CIT: gradually reduced from 42.4% in 2000 to 34.2% in 2005, 29.4% in 2010 and 26.3% in 2013)
Types of tax relief schemes used in OECD and other major economies Number of schemes
CAN
Note: Instrument used by Canada highlighted in red. There are some countries with more than one scheme.
Tax Incentive Support for Business R&D in OECD Countries – Canada
Figure 3.2. Design of R&D tax incentives: Canada8 compared to OECD+ economies, 2015 Eligible expenditures within scope of tax relief Median9 OECD+ tax incentive
SR&ED investment tax credit
R&D labour
Subcontracted, collaborative R&D
Materials
Overheads
Machinery and equipment Intangibles Buildings and land Depreciation
Number of schemes subject to relevant provisions Refundability of unused credits (payableRefundability credit)
Indefinite Carry-over Carry-over provision
Thresholds and ceilings Threshold/Ceiling
All enterprises
SMEs
9
4
25
14
Limited(mean: 8 yrs., median: 5 yrs.)
8
Refund wage system
8 Not applicable
16 (20 years)
19
8
27
Preferential of Specialtreatment treatment SMEs SMEs/young firms
33 No
13 Yes Number of schemes
Note: Instrument used by Canada highlighted in red. Some countries have more than one separately identified incentive scheme.
Tax Incentive Support for Business R&D in OECD Countries – Canada
Tax subsidy rates on business R&D expenditure
Figure 4. Implied tax subsidy rates on R&D expenditures11, 2015 B-Index country distribution, by firm size and profit scenario 0.50 FRA
FRA
0.40
1 minus B-index
ESP CAN
0.30
ESP
CAN
0.20 CAN CAN
0.10
0.00
NZL
NZL
ITA JPN NZL ITA, JPN, NZL
ITA NZL ITA, NZL
-0.10 Large/Profitable
SME/Profitable
Large/Loss-making
12
SME/Loss-making
Tax Incentive Support for Business R&D in OECD Countries – Canada
What is the impact of government support for business R&D?
Figure 5. Business R&D intensity and government support for business R&D, 2013 Volume of tax support to business R&D, Millions USD PPP, 2013 No incentive x No data available
USD 75 million
USD 2 500 million
USD 250 million
4.0
x JPN
3.0
BERD, as % of GDP
KOR
ISR
3.5
2.5
FIN
SWE
CHE
2.0
DEU
0.5 0.0
AUS EST ESP NOR CZE
ITA NZL SVK POL BRA x TUR MEX ZAF GRC CHL
0.00
0.05
0.10
FRA
ISL IRL
NLD
1.0
SVN AUT BEL
CHN
1.5
USA
DNK
HUN
CAN
RUS
GBR
PRT
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Total government support (direct and tax) to business R&D, as % of GDP 12
Tax Incentive Support for Business R&D in OECD Countries – Canada
Figure 6. BERD and public support for business R&D, Canada, 2000-2013 As a percentage of market-sector GVA
Tax Incentive Support for Business R&D in OECD Countries – Canada