Do we need the tax assistance program for technology companies? (4)
Lyne Bouchard, who heads TechnoMontreal, blogs about the document they delivered last week to the “task force” studying companies operating in information technology. Qu.bec’s Ministère des Finances created this task force to make recommandations about what to do about these tax measures, which are about to expire. One famous example of tax assistance for high-tech companies is for instance Ubisoft, which is receiving up to 34.5% for each of its employees, but there are also known examples in the Cité du Multimédia in Montréal. The comission toured the province to hear what local trade groups, organizations and mayors had to say about the tax cuts given to companies and the impact on local economy.
In the proceedings, which you can download and listen, she mentions that tax measures allowed companies to be competitive, to invest in research and development, to support small and new businesses and innovation in those small businesses.
However, TechnoMontreal’s final position is somehow unexpected, as they ask the governement to stop the program. Specifically, the program is criticized to tying aid to specific sites, like the Cité du Multimédia; the entry ticket to be accepted in the progam is too “expensive” etc.
And I find myself agreeing to TechnoMontreal’s position. On an earlier MTW post for instance, Carl Mercier mentionned it will take up to 18 months to get the check from the tax credit progam. I do think the tax measures are great for big companies who can go through the whole process, and invest significant human and time ressources to be accepted in the program, but they are somehow irrelevant for small companies and startups. The Québec governement should instead rethink its strategy on how they could transform the province into a high-tech zone (hint: look at Ireland), by making sure there is a healthy and enticing environment for entrepreneurs, and not getting in the way.
But then again, this is a personal opinion, as I am opposed since a long time ago to financial aids and I think it’s better for institutions to invest in other areas like higher education. If you are an entrepreneur, and you have applied for the tax credit program, I would like to have your opinion about it.
I find it hard to understand how Ms. Bouchard sees the R&D tax credit program as too lengthy and that small companies do not have the resources to take advantage of it. Clearly she is only listening to companies that are poorly managed that really should take responsibility instead of criticizing a program that, in my view, is a huge incentive (as well as a success) for all technology companies residing in Quebec or Canada for that matter.
I have worked with SR&ED tax credits for 20 years now and have researched it well in order to take full advantage of the program and to help small business adapt to its “very simple” requirements. Yes I do agree that it takes time to receive the money in many cases but then again I have had no real issues there when using proper strategies at filing documents on time and making sure they are properly worded to avoid confusion when being read (processed) by CRA. I would also make the point that Quebec’s financial institutions including Investissement Quebec are well in tune to help finance such R&D tax credits at a reasonable cost.
In my opinion the wrong signal is being projected here. However, when Ms. Bouchard talks about the cité du multimedia I cannot agree with her more. This was damaged goods from the beginning and must be repaired or scrapped. Again, I see misinformed company’s who are paying into a system where other’s are making money at the company’s expense. This is where the government should focus more. I believe if you are consulting industry with government programs your strategies must focus on making sure that industry get the lion’s share of the financial incentives and not the consultant.
I do support and respect what Ms. Bouchard is trying achieve, and feel that more people that are knowledgeable in this field with proven track records should help her find solid solutions to help our technology focused industry.
Doug Paul
Hi Doug Paul
I understand and appreciate your comment.
note: I thought that being forced to hire a consultant like you to get R&D credits is a sign that the process is overly complex; startups and starting companies might not have ressources to do that. Or maybe they don’t know that they have to hire a specialist like you to do this job; they will go through it only to be lost in the process.
what Ms. Bouchard called was a change in strategy and rethink the R&D assistance program. And I still agree with her position. Technology has changed a lot in 5 years, specially in the way they are funded
Hi Heri,
Thanks for your reply, it is much appreciated. I can see your point and if you don’t mind I would like to focus more on the opportunity that each and every company in Canada has available to it. The problem is not the complexity of our SR&ED tax credit system with the Federal government it is in the way our businesses operate. I have been consulting for 10 years now and have been working in the field of Government relations, Finance and SR&ED tax credits since 1985 and most of what I see is that companies need help on “all” fronts. Taking the SR&ED issue is only one of several problems that companies face. If they really took the time to safeguard the tax credits that are legally owed to them they would find the system rather accommodating and the need for consultants would not exist. The largest impact (in refunds to total operational cost) this program offers is to smaller companies who can receive “even” larger sums of money “if” they spent the time and efforts in the same way as they do their sales strategies to grow and maintain their customer base. Heri, if you had $100,000 to $700,000 owed to you in refunds and you were an astute businessman, would you maintain a trivial focus on the SR&ED Claim or would you make sure it was dealt with in an efficient and professional manner? The answer is obvious. Sadly, our business community is weak in many areas and is the first to complain about anything that, more or less, was caused by their inaction. I’m sure you can tell me a few stories there.
On the other hand I believe that Quebec’s R&D tax credits are too generous and should be cut back so that more companies feel the real cost of doing business in technology thus creating a bigger emphasis on Marketing and Selling the Technology! We in Quebec have too many exceptional “technological showcases” that are going nowhere in the world. That is the real issue. If Ms. Bouchard focused there, I believe she would help her readers more. If you want to see how hard it is to receive government grants for SR&ED go to other countries to see how bad it can possibly be. I have a customer from Israel who cannot stop telling me how much he finds the SR&ED project efficient, generous and fair. There are so many others. By the way, I know of many small & medium size companies who are doing very well in their SR&ED claims and don’t need help.
Many years ago, I saw the need for my services when working for a large corporation that was feeding off government programs. They had the infrastructure (250% overheads +) to deal with the government on all levels and obviously could afford the full time employment of someone like me amongst other specialists. Clearly I was disappointed with this reality and am now focusing with the smaller corporations with much smaller overheads like 60% or less. There I have found an opportunity that needs my help. It is a real pleasure when I see how the impact of my services has helped so many.
Doug Paul
The Australian government has set aside more than 20 billion dollars in funding programs (grants and loans) for financing small businesses like yours. Free government grants are available to help you start-up, expand or improve your business, if you are eligible.
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