wwhchung

Would love to have access to anonymized SR&ED claims data. I'll also bet that while 75% of the claimant's are small businesses, they only get < 10% of the $4B (remind you of anything)?

It's why I advocate for a lower hard cap as well. With a hard cap, it's likely that the total amount paid out is well under $4B, which means we can then go on and address how we can better distribute funding and change the evaluation process to not be as restrictive.

Or, it could have folded and made something else. Or any number of other scenarios. But debating SR&ED being good or bad is too theoretical and everyone can point to examples on all sides. This is why I chose a very specific issue with SR&ED and proposals on how to fix it.

I'm not stating that SR&ED does not have its benefits, but there are some glaring flaws that need fixing. Others include the SR&ED process itself, evaluation of SR&ED claims and more. However this is the first one I could concretely back up with examples and math and give real solutions to.

Your Canadian counterparts are incorrect, or they must not have read the post clearly. You are in fact able to deduct executive compensation against net income. You CANNOT claim excessive executive compensation for your SR&ED expenditures, but that is NOT what I'm indicating. If your counterparts still claim that this is not the case, they are pretty sh*tty accountants.

You are incorrect.

Because it's not illegal as my post points out. It's a flaw in the structure.

Yes, it happens a LOT. I can't point fingers (it's not polite, and I'm Canadian), but it's what prompted me to write the article.

And yes, it does matter who owns the IP. If a sale happens, the proceeds to to the residing country's tax base. If it's not in Canada, we lose out on those gains.

Hi there. Claim 1 is not incorrect. I am not stating executive compensation is used to claim SR&ED. I am stating it is used to suppress net profits to qualify for the higher rate. Also,

Claim 2, there is no requirement for IP to be owned by the Canadian entity for its development to be qualified for SR&ED (I’ve verified this from multiple accountants and the CRA).

As for Claim 3, you realize that this is indefinite right?

Yup. I chose to write about something I could put figures to rather than something that's much more subjective and I don't really have a good alternative for with data to back it up. I 100% agree though.

Bad unintended consequences was a nice way of phrasing 'it sucks and is draining money away from real R&D/innovation'

I agree that there are many other issues with SR&ED (including the one you mentioned above). I actually point out a few at the bottom of my post. :) I just chose to tackle one that I could put clear numbers and examples to and viable solutions.

Yup. Many more issues, but this is one that isn't subjective and I can provide possible solutions to, so its the first I wrote about. :)

I agree that there are many other issues with SR&ED (including the one you mentioned above). I just chose to tackle one that I could put clear numbers and examples to and viable solutions. With respect to the SR&ED process itself, that's going to be another post once I have a well thought out proposal and data to back it up. :)

Agreed there are many other fundamental issues with the program. However I chose to tackle rates first since it has strong examples and solutions. The other issues are more controversial and I haven't formulated a comprehensive fix for them yet. But I will in the future. :)