On April 7, 2022, The Canadian Government released its 2022 federal budget. #budget2022
This year’s budget places emphasis on a number of key initiatives, with continued support for its popular Scientific Research and Experimental Design (SR&ED) program and the creation of a Canadian Innovation and Investment Agency to support the growth of research and development (R&D and innovation from Canadian businesses and entrepreneurs.
Additionally, the budget supports a new Canada Growth Fund for private sector investment and millions of dollars for the semiconductor and climate solutions industries. Key areas of budget allocation include:
- Recovery from the pandemic
- Growing the economy
- Addressing Canada’s affordable housing issue
- Driving investment for small businesses and overall business support and growth
- Clean air, middle-class jobs
- Public healthcare
- Tax fairness
- Other key fiscal policies
Boast supports innovative Canadian companies and entrepreneurs who invest in R&D. This year’s budget continues to support these same companies and entrepreneurs with strong government fiscal policies, including tax plans, continued support for R&D tax incentives, and labor policies for hiring a full time, part-time and contractor workforce.
2022 Budget and SR&ED—A Cornerstone of Innovation
Regarding the SR&ED tax credit program, this year’s budget proposes continual support to businesses investing in R&D and innovation through tax credits from the SR&ED initiative. The federal government refers to SR&ED as a ‘cornerstone’ of Canada’s innovation strategy and will look at ways to improve the program. The budget review states (emphasis added by Boast):
The Scientific Research and Experimental Development (SR&ED) program provides tax incentives to encourage Canadian businesses of all sizes and in all sectors to conduct R&D. The SR&ED program has been a cornerstone of Canada’s innovation strategy. The government intends to undertake a review of the program, first to ensure that it is effective in encouraging R&D that benefits Canada, and second to explore opportunities to modernize and simplify it. Specifically, the review will examine whether changes to eligibility criteria would be warranted to ensure adequacy of support and improve overall program efficiency.
As part of this review, the government will also consider whether the tax system can play a role in encouraging the development and retention of intellectual property stemming from R&D conducted in Canada. In particular, the government will consider, and seek views on, the suitability of adopting a patent box regime in order to meet these objectives. https://budget.gc.ca/2022/report-rapport/chap2-en.html#2022-0
“We are pleased to see the continued support, and potential simplification of, the valuable Canadian SR&ED tax credit program,” said Alex Popa, Boast CEO and co-founder. “Canada’s innovation is high because businesses are able to invest in new technologies and processes, and get support and relief for those investments through government programs like SR&ED. Our aim is to help as many Canadian businesses as possible capture their eligible portion of the estimated $4 billion provided through the annual SR&ED budget.”
The New Canadian Innovation and Investment Agency
The budget also includes the creation of a new Canadian Innovation and Investment Agency supporting innovation acceleration. The budget states, “Our country has never been short on good ideas. But to grow our economy, invention is not enough. Canadians and Canadian companies need to take their new ideas and new technologies and turn them into new products, services, and growing businesses. However, Canada currently ranks last in the G7 in R&D spending by businesses. This trend has to change.”
From the 2022 budget, the following selections from Boast support the new budget’s intent to accelerate innovation and R&D in several ways:
Strengthening Canada’s Semiconductor Industry
The Federal government announced $150 million to support investments in the development and supply of semiconductors. This investment built on the $90 million allocated in Budget 2021 to retool and modernize the National Research Council’s Canadian Photonics Fabrication Centre, which supplies photonics research, testing, prototyping, and pilot-scale manufacturing services to academics and businesses in Canada.
In addition to these previous investments, Budget 2022 proposes to provide $45 million over four years, starting in 2022-23 on a cash basis, to Innovation, Science and Economic Development Canada to engage with stakeholders, conduct market analysis, and support projects that will strengthen Canada’s semiconductor industry.
Growing Canada’s Health-Focused Small and Medium-Sized Businesses
The Coordinated Accessible National Health Network (CAN Health Network) brings together hospital networks and health authorities in nine provinces to procure innovative health care solutions, including investing in made-in-Canada technologies. This model shows the potential to help deliver better care to Canadians, help our health technology businesses grow, and create good middle-class jobs across the country.
The 2022 budget proposes to provide $30 million over four years, starting in 2022-23, to build upon the success of the CAN Health Network, and expand it nationally to Quebec, the territories, and Indigenous communities.
Making Canada’s Economy More Competitive
A competitive economy is a fair, growing, and innovative economy. In this regard, the government will consult broadly on the role and functioning of the Competition Act and its enforcement regime. However, there are also shortcomings in the Act that can easily be addressed and move Canada in line with international best practices.
The 2022 budget announces the government’s intention to introduce legislative amendments to the Competition Act as a preliminary phase in modernizing the competition regime. This will include fixing loopholes; tackling practices harmful to workers and consumers; modernizing access to justice and penalties, and adapting the law to today’s digital reality.
Supporting Canada’s Innovation Clusters
Since they were launched in 2017, Canada’s innovation clusters have helped build successful and growing innovation ecosystems across the Canadian economy. These have included plant-based protein alternatives; ocean-based industries; advanced manufacturing; digital technologies; and artificial intelligence.
As of December 2021, Canada’s innovation clusters have already approved more than 415 projects with 1,840 partners, worth over $1.9 billion. These projects have been supported through co-investment by government and industry across 11 provinces and territories. Together they have also generated more than 850 new intellectual property rights.
The 2022 budget proposes to provide $750 million over six years, starting in 2022-23, to support the further growth and development of Canada’s Global Innovation Clusters. Building on their success to date, these clusters will expand their national presence and will collaborate to deepen their impact, including through joint missions aligned with key government priorities, such as fighting climate change and addressing supply chain disruptions. To maximize the impact of this funding and to ensure it corresponds with industry and government needs, it will be allocated between the five clusters on a competitive basis.
Investing in Intellectual Property and Research
Investing in and protecting intellectual property and research are vitally important pieces of building an innovative economy.
Answering the call from those looking to innovate, Budget 2022 helps to protect and expand intellectual property and research; attract leading researchers; advance critical research priorities, and strengthen the security of our research institutions.
Building a World-Class Intellectual Property Regime
Patent-owning businesses grow faster and pay higher wages. However, on the number of patents held, Canada lags behind other countries we are competing with to attract investment and grow our economy.
Since 2015, the federal government has taken important steps to improve Canada’s intellectual property performance, including through the launch of the National Intellectual Property Strategy in 2018, and Elevate IP and IP Assist announced in Budget 2021.