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Taxpayers’ Ombudsman echoes CME concerns over SR&ED program

Published by CME Webmaster on February 14, 2012

The federal Taxpayers' Ombudsman issued a report this week examining key challenges facing businesses that file scientific research and experimental development (SR&ED) claims with the Canada Revenue Agency (CRA).

Many of Ombudsman's findings reflect longstanding concerns voiced by Canadian Manufacturers & Exporters (CME), including varying explanations provided by the CRA in regards to why certain activities were not eligible under the program.

"For the first time, a credible government agency has found evidence of what we have heard amongst the business community for several months now," says CME President & CEO, Jayson Myers. "It will be increasingly difficult to ignore these serious concerns in the future. We look forward to working with government to create a more efficient and effective system."

The Ombudsman also noted that the CRA must improve the way it communicates – particularly when it comes to project eligibility and the formal review process.

"Most claimants are small and medium-sized businesses that do not necessarily have the internal expertise to navigate the complexities of the SR&ED program," says Myers. "It is important that Canada continues to provide the tools and resources to foster innovation; and it is equally important that these tools are clearly defined and easily accessible."

Among the issues under review by the Ombudsman, CME notes the following:

Regional discrepancies: Many companies have raised a number of inconsistencies between various regions with regards to the eligibility of activities under the SR&ED program. The Ombudsman notes that there are reasons why similar claims can result in different eligibility determinations in different parts of the country other than discrepancies or inconsistencies in the application of policy, and these should be explained to claimants. The Ombudsman notes that stakeholders would benefit from greater clarity with regards to the CRA's policies and procedures for this program.

Preliminary eligibility discussion: The industry has raised a number of issues related to the lack of information being provided by the CRA before the claim is submitted. In some cases, many companies alleged that the CRA had not communicated any eligibility concerns or preliminary decisions at all before issuing the SR&ED Technical Review Report. The Ombudsman is clear in his report that "communicating the preliminary eligibility concerns and opinions to claimants in a timely manner is fundamental to respecting the Taxpayer Bill of Rights." The Ombudsman recommends "the CRA to continue to take whatever steps are necessary to keep taxpayers adequately informed about their SR&ED claims, and maximize its accountability to claimants."

Administrative Second Review: The Ombudsman notes a significant confusion amongst the SR&ED community with regards to the Administrative Second Review process, which is intended to ensure that the technical reviews carried out by RTAs are consistent with the current SR&ED legislation, and that the policies and claims were given due process. The Ombudsman concludes, "It is apparent that SR&ED claimants would benefit from a better understanding of the ASR; namely, what it is, when it is granted and what it involves. Taxpayers would benefit from enhanced communication and outreach from CRA aimed at raising awareness and understanding of this important step in the claim review process."

For more information, read Driving Business Innovation: CME Response to the Independent Panel on Federal Support to Research and Development (November 2011).

 

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