S&T community reacts to Jenkins panel report on federal support for business R&D

Reaction is split on two key recommendations by the Expert Panel Report on Federal Support to Research and Development to change the eligibility rules for R&D tax credits and fundamentally alter the structure of the National Research Council (NRC). The Jenkins Panel - named after expert panel chair Tom Jenkins, executive chairman and chief strategy officer of Open text Corp - has landed in the policy community with a bang. There is no shortage of opinion on the merits of the Panel's advice, which was delivered October 17th to Dr Gary Goodyear, minister of state for science and technology.

RE$EARCH MONEY spoke to several key individuals from the business, policy and academic communities, soliciting their opinions on the Panel's recommendations. The majority zeroed in on the panel's call to limit scientific research and experiment development (SR&ED) tax credits for small companies to labour and transition the NRC into separate stand-alone institutes as the Panel's most pertinent recommendations.

In order to provide readers with a greater understanding of the issues surrounding these two key recommendations, we've compiled a sampling of comments. Look for even more extensive coverage in the October 31 issue of RE$EARCH MONEY:

Breaking up the National Research Council

John McDougall, president, National Research Council  - "Some of the recommendations specifically address NRC and would, if implemented as presented, represent enormous change.  However, I encourage you not to overreact.  I would like to stress that the recommendations presented by the panel are just that - recommendations for consideration by government. There is no commitment that the government will accept or act on any or all of the recommendations.  In my opinion, the broad message regarding the need for increased industrial alignment is sound.  And I am pleased that is exactly the path we are on ... I think you will find many ideas (in the report) that align very well with our strategic direction and the transformation that is underway.  Indeed, this report will allow us all to better understand NRC's strengths and areas where we could improve."

Jayson Myers, president, Canadian Manufacturers and Exporters - "I would not like to see IRAP separate from the NRC. If it's separate it could lose some of its technical expertise ... IRAP within NRC provides a very good channel to the NRC institutes. It's part of their strength and value that it brings to the table. They could do more to leverage that relationship."

Dr Tom Brzustowski, RBC Financial Group Professor in the Commercialization of Innovation, University of Ottawa and former president of the Natural Sciences and Engineering Research Council -  "Employees are employed to do certain things. If an organization changes direction and you're assigned to do something else, I would hope the employees would move, change and contribute."

David Hearn, principal, Scitax Advisory Partners  - "The Panel says chop it into pieces and throw the pieces all over the country. This would allow ministers to make announcements in their ridings. If I were at the NRC, I would be very concerned about what is being suggested here."

Basing SR&ED tax credits on labour only

Jayson Myers, president, Canadian Manufacturers and Exporters - "A labour-based tax credit is of concern for our members because they have a higher level of non-labour claims.  Most expenditures are for prototyping, design for manufacturing, process improvement and re-tooling ... We would have liked to have seen is an expansion of refundability.  Times are tough and profits are squeezed. We want companies to do R&D even if they're not profitable. I was disappointed."

"There's a fundamental tension within the SR&ED system. There is incentive for R&D but also an expectation that R&D leads to profit. It's a disconnect because you can only receive a claim if the company is profitable. The report didn't get at the real problem of administration. The real problem is the CRA (Canada Revenue Agency)."

Russ Roberts, SR&ED advisor to the Canadian Advanced Technology Alliance (CATA)  - "The move to a labour-based credit is an attempt to simplify the program but it doesn't get to the root of the problem. There are very significant costs within what is expected of a firm to learn whether they have a successful SR&ED project and the problem is increasing. The new review procedure at CRA takes a very narrow perspective of a project and a narrow concept of what is eligible.  The community needs to be involved to gain consensus."

David Hearn, principal, Scitax Advisory Partners LP - "It's total nonsense to say that complexity is forcing companies to rely on consultants. Companies really use consultants to decode (SR&ED's) technical criteria ... If they're recommending labour-only on the basis that it will reduce compliance costs, that's a wrong-headed interpretation of the situation. Confusion over record-keeping is the real issue. The issue is the lack of bright line (clearly defined) criteria to demonstrate the eligibility of scientific work."