Editorial - 25-8

Will S&T suffer a hit once the Conservative government launches its deficit elimination strategy? I'd happily take a nickel for every rumour swirling through business, academia and government. The prospect of cutting funds to research and innovation when many key mechanisms are already underfunded is frightening indeed, but it doesn't have to be that way.

Rather than reducing the budgets of effective agencies and organizations, the government needn't look any further for a new revenue source than the bloated scientific research & experimental development (SR&ED) tax credit program. This year, the program is expected to account for more than $3.5 billion in foregone revenue (up from $2.5 billion in 2005).

Yet much of that money is either hived off by a rapidly growing cottage industry of consultants or goes to bogus claims which sail through due to a lack of oversight. Some peg the "leakage" at 30% or more than $1 billion. And while the pilfering continues unabated, the amount of R&D conducted by business is falling.

By eliminating fraud and skimming by consultants, the government could easily boost the amount it spends on research and innovation and still achieve its deficit reduction objectives.

SR&ED falls under the ongoing R&D review, which needs to strongly advocate for a more balanced system of direct and indirect (tax assisted) support. Empirical evidence from many other countries shows that properly targeted direct support is a key part of an effective innovation support system. It's time Canada put its innovation house in order and take the necessary steps to stimulate innovation.