Rewarding Innovation: Improving Federal Tax Support for Business R&D in Canada
AbstractBusiness innovation is viewed by many as a solution to Canada’s ailing productivity performance. One of the more troubling aspects of Canada’s innovation track record is that businesses spend relatively little on research and development (R&D) despite having access to some of the world’s most generous R&D tax incentives. Canada’s low levels of business R&D have called into question the effectiveness of Canada’s generous R&D tax incentives, particularly the flagship federal Scientific Research and Experimental Development (SR&ED) program. A deeper analysis, however, reveals that tax incentives are effective in stimulating more R&D – that is, Canada would have lower levels of business R&D in the absence of these inducements. Instead, the root cause of Canada’s business R&D deficit appears to stem from structural aspects of the economy and, more importantly, a lack of demand-related pressure to pursue innovation.
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Bibliographic InfoArticle provided by C.D. Howe Institute in its journal C.D. Howe Institute Commentary.
Volume (Year): (2011)
Issue (Month): 334 (September)
Fiscal and Tax Competitiveness; Canada; research and development (R&D) incentives; Scientific Research and Experimental Development (SR&ED) program;
Find related papers by JEL classification:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
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