CATA plans to keep revenue Canada honest with strategy to monitor announced changes to SR&RD program

CATA plans to keep revenue Canada honest with strategy to monitor announced changes to SR&RD program

The Canadian Advanced Technology Alliance (CATA) is seizing on proposed changes to the scientific research & experimental development (SR&ED) tax incentive program as a test case for an aggressive new advocacy model, developed to exploit new methodologies and technologies in the service of its membership. CATA is unveiling its new advocacy model with a major campaign to ensure that administrative changes to the SR&ED program are quickly and thoroughly executed.

The campaign will establish thirdparty oversight, performance markers and benchmarks for the SR&ED program, and comes weeks after the release of a Revenue Canada Action Plan. The plan outlines areas where it can be enhanced and improved, with the ultimate objective of changing it into a true incentive for increased R&D in the private sector.

,The RevCan Action Plan marks a major turning point for the SR&ED program. In addition to a industrycomposed steering committee to oversee implementation, it calls for the creation of sector-specific committees and gives the program new independence with a director general overseeing its administration. Implementation of several of the initiatives is already underway.

The business community has long viewed SR&ED’s application as an uneven and often frustrating attempt by government to audit its R&D activities. Horror stories abound of the methods and attitudes program administrators have displayed when applying its complex compliance criteria, generating a backlash that spurred the decision to hold a conference last June to seek ways in which improvements can be implemented (R$, June 17 & July 8/98). One ofthe main recommendations stemming from the conference was the development of an Action Plan, based on industry input and ongoing dialogue.

The CATA campaign is a loud, declarative response to RevCan’s Action Plan and a forceful statement that – good intentions aside – the status quo is unacceptable and must be changed.

“We’re going to hold the department accountable to the changes within a real time. We’re collaborating with Revenue Canada in terms of training and best practices, but this is very much an independent accountability system,” says CATA president John Reid. “Everything in our plan is linked together and it’s really part of a much more aggressive advocacy model within our alliance. This is the first example of that model.”

A key element of the CATA campaign is a small monitoring team led by Gary Sears of KPMG’s research division and Dr Russ Roberts, a former SR&ED senior science advisor and who is now CATA’s policy advisor on taxation issues. While supportive of RevCan’s proposed changes, the fivemember team will provide an independent means of ensuring compliance.

“What CATA is doing is developing an approach to informed advocacy, trying to bring to bear good analytical work on those issues and that’s precisely what this is about,” Roberts told RESEARCH MONEY. “We’ve come up with a relatively solid methodology that will allow us to see what is working and what isn’t.”

The campaign is largely based on a host of web-based tools CATA has assembled, facilitating faster, more effective communication with its membership of 2,700 companies.

Separate software proposal

The CATA campaign coincides with the first release by the sector-specific committees established to develop issue sheets, standards and guidelines. The Software Action Plan was created by an alliance of several associations including CATA, the Information Technology Association of Canada, and three regional groups. Observer status was granted to the Canadian Information Processing Society, representing individual professionals.

The software report was submitted to the SR&ED steering committee chaired by John Mann, Chrysler Canada’s director of engineering, and contains three clear action items with action to be taken within two to six months:

Short term remedial actions to facilitate “greater reasonableness, fairness and accuracy” and win back the confidence of the software sector;

produce new issue sheets to produce guidance that is consistent with the legislation;

Develop a separate guide with examples showing how a company can develop information records required to support its SR&ED claim. RS

RevCan’s SR&ED 13 Point Action Plan

1 Make program more independent with focus on science and incentives

2 Create steering committee to implement action plan

3 Establish sector-specific committee to develop issue sheets, standards and interpretation guidelines

4 Develop communications document explaining departmental policies about audit process

5 Develop stakeholder code of rights, obligations and responsibilities

6 Avoid disputes between government and industry through better communication

7 Establish standard mechanism for dealing with informal disputes

8 Clear backlog of disputed past claims, possibly through mediation

9 Make communication between appeals body and taxpayer part of standard appeal process

10 Initiate joint industry-RevCan training for science auditors

11 Improve auditing process through various means

12 Clarify documentation requirements

13 Explore options for process audits instead of audit of individual projects

Copyright Evert Communications Ltd. Dec 2, 1998

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