As part of the ongoing series of events focusing on entrepreneurship in Canada, the Canadian Securities Exchange (CSE) and the University of Calgary’s Faculty of Law co-sponsored an event in Calgary on January 15th, 2015 on promoting innovation in Canada.
The sold out event, entitled “Frugal Fare, Intellectual Feast”, featured University of Toronto Law Professor Jeffrey MacIntosh, B.Sc. LL.B. LL.M., a leading voice in the evolving Canadian innovation policy landscape. As part of his presentation, MacIntosh offered his perspectives on the current state of funding for the Scientific Research and Experimental Development (SR&ED) tax credit and the impact to small firms of recent cuts to the SR&ED program.
MacIntosh’s presentation focused on the findings of a Review of Federal Support to Research and Development, and the importance of relying on market decisions rather than bureaucrats in deciding how to allocate funds to technology companies.
At its core, he believes the Federal Government’s decision to pursue a “direct assistance” model rather than “indirect” funding from the SR&ED tax credit program unfairly burdens typically cash-starved smaller firms and start-ups. Further, the kinds of ventures favoured by the direct assistance model are typically ‘lower-risk’ whereas the path towards innovation often requires companies prepared to take on greater risk. Thus, according to MacIntosh, the direct assistance model can actually slow down the pace of innovation.
The Value of Indirect Assistance
MacIntosh insists indirect assistance through deductions, tax credits and flow-through shares, remains a viable funding framework for small cap firms. This structure, he argues, removes the issues of political bias and regional preferences. It also reduces government’s overall administrative costs, while providing cost certainty for young, cash-starved business.
The reduction of paperwork and quicker access to liquidity are vital efficiencies for any small firm. The SR&ED tax credit program offers structured assistance and calendar certainty for cash strapped start-ups.
Accessing Capital Key to Innovation
Presentations such as these are crucial to the dialogue on the role of public policy in shaping innovation in public markets. According to Western Canada Advisor for the CSE, Mark Francis:
“The CSE believes that being an exchange is also about creating a meeting place for ideas and discussion about the capital markets. Different and potentially controversial points of view are critical to testing worthiness not just of investment theses but also of policies and structures that affect access to capital.”
Given the interest in the event, it is clear that funding for small and medium sized firms remains an important component to supporting innovation.
As the Exchange for Entrepreneurs, the CSE is actively working to improve access to capital for innovative firms as well as reduce the administrative burden associated with operating as a public entity. Ultimately, the CSE believes, this enables entrepreneurs more opportunities to focus time and resources on growing their business.
For additional reading on Jeffrey MacIntosh’s perspectives on innovation in Canada and other related readings on the subject, the following links may interest you:
An Entrepreneurial Perspective
Federal SR&ED legislative proposals status
Innovation Canada: A Call to Action (Summary)
A delegation including representatives from the CSE, Zimtu Capital and several CSE-listed companies are touching down in Europe for a 7-day, 4-city investment roadshow spanning two countries, 900+ kms and countless beer tastings.
