CCI’s 2019 Federal Budget Submission
Over the past three years, the Government of Canada has taken significant steps to bolster Canada’s innovation economy. These steps have included committing sizeable resources to implement important strategic initiatives such as a national Intellectual Property (IP) strategy, a billion-dollar Innovation Superclusters Initiative, the national data strategy that is under-development, and an updated national cybersecurity strategy, among other programs geared towards helping Canadian innovators compete globally.
Since 2015, the reorientation of venture and growth capital programs, including the Strategic Innovation Fund (SIF) and the Venture Capital Catalyst Initiative (VCCI), have allowed for more Canadian innovators to access the critical capital they need to scale-up. The Accelerated Growth Service (AGS) has provided innovators a concierge service that leverages the work of agencies and departments across government to help domestic technology companies access new markets and customers world-wide. Modernized and more agile procurement opportunities for innovators have been introduced, including the challenge-based Innovative Solutions Canada (ISC) and the Innovation for Defence Excellence and Security program (IDEaS). And the Global Skills Strategy, with the introduction of the Global Talent Stream of the Temporary Foreign Worker Program (TFWP), has significantly reduced the time it takes for innovative high-growth Canadian firms to bring much-soughtafter highly-skilled talent to Canada. These measures have all been lauded by the leaders of Canada’s innovation community.
Yet, the last three years have also been marked by a rapid acceleration of the global innovation race, and more than ever, economic strategies are needed in Canada so our domestic technology companies can continue to grow here at home and scale-up around the world. All innovation experts agree that it is innovative, domestically, high-growth companies that provide the critical public and private wealth Canada needs to remain an economically competitive and prosperous society. Companies that scale from $100 million to a billion and beyond provide the most return to their domestic economies. We see this happening in countries such as the United States, Israel, Germany, South Korea and even China.
Despite this, government officials across Canada have been investing considerable amounts of time, energy and political capital into attracting foreign, multinational technology companies to Canada without any economic studies on the effect they have on the domestic tech ecosystem and our economy as a whole. More concerning, these large companies pay little to no taxes to the governments that are underpinning their growth, as the profits they earn are realized at their foreign headquarters – not in Canada. A recent study by the Munk School of Global Affairs finds that very few political “jobs” announcements materialize as advertised. In addition, foreign branch-plants exacerbate existing labour market shortages by creating a government-funded competition for wages and take publicly funded Intellectual Property created at Canadian universities.
In September 2018, the Government’s Economic Strategy Tables released a series of recommendations that focused on delivering better access to talent, capital and customers for Canada’s most successful tech companies. The reports validated strategies the Council of Canadian Innovators (CCI) has advocated for since we were founded in September 2015 by the CEOs of Canada’s fastest growing technology companies, such as helping proven market winners – innovative, high-growth scale-ups – reach another level of success and become global giants anchored here in Canada.
In Budget 2019, our members will be looking for the government to work swiftly to implement the recommendations of the Economic Strategy Tables and put them into action so that Canadian tech companies can reach their full potential and scale globally. The budget measures listed below will have a minimal impact on the fiscal plan of the government, but will greatly support the growth trajectories of Canada’s fastest scaling companies. Budget 2019 needs to help innovators address the gaps they face accessing talent, capital and customers, so they can grow more rapidly, create more well-paying jobs in Canada, and generate more of the private and public wealth the government requires to sustain the important social and infrastructure programs all Canadians rely upon and value.
Summary of Budget Asks
Budget 2019 should increase access to capital for domestic innovators by:
- Increasing the ceiling that limits companies who are over 500 employees from accessing the Industrial Research Assistance Program (IRAP). The cap should be eliminated so that companies with more than 500 employees can access IRAP, because there are very few programs available to companies that scale beyond 500 employees;
- Ensuring Canada’s corporate tax rates remain competitive with the United States;
- Improving the Scientific Research & Economic Development Tax Credit (SR&ED) by increasing the ceiling on taxable income and ensuring SR&ED goes to benefit the Canadian economy;
- Committing to leave the Employee Stock Option unchanged;
- Enhancing the Strategic Innovation Fund (SIF) to provide greater transparency to Canadian innovators.
Budget 2019 should increase access to talent for domestic innovators by:
- Making the Global Skills Strategy pilot permanent;
- Investing in upskilling initiatives to help address Canada’s labour shortages in the Information and Communications Technology (ICT) sector;
- Stemming the brain drain by supporting skilled graduates who choose to stay in Canada and work for high-growth domestic firms.
Budget 2019 should increase access to customers for domestic innovators by:
- Supporting the Trade Commissioner Service in its reorientation towards the digital, intangible economy;
- Streamlining and modernizing federal procurement practices to allow for more new entrants to participate in the procurement process;
- Leveraging digital government as a tool for economic growth across Canada.
Budget 2019 should also include measures that increase Freedom to Operate for Canadian innovators by:
- Supporting policies that enable Canadian innovators to capture the scale and scope of data generated by Canadians through a National Data Strategy that contains Data Trust infrastructure;
- Reducing regulatory burdens that stifle innovation and hinder the growth of Canadian technology firms;
- Ensuring sustainable funding is available to support the development and protection of Intellectual Property (IP) in Canada
- Fast tracking the implementation of the National IP strategy, including the IP Collective contained in the 2018 Federal Budget, by creating a dedicated fund to help Canadian innovators pay for the generation of valuable IP portfolios.
- Embracing emerging technologies developed by Canadian firms in the medical and health technology sectors.