Bill Morneau Tax Changes: A Corporate Funding Perspective of Budget 2018

Bill Morneau and the Trudeau Government tabled a much-anticipated Federal budget last Tuesday. Corporate tax incentives, like the Scientific Research and Experimental Development Tax Credit (SR&ED), have not been amended.

From an entrepreneur funding perspective, there were relevant changes made in three areas:

1. Hiring
2. R&D
3. International Marketing / Export

Hiring Funding

1) Canada Summer Jobs 2019-2020

Canada Summer Jobs (CSJ) is a federal incentive that provides wage subsidies to employers to create jobs for secondary and post-secondary students. For a for-profit employer, CSJ will cover 50% of the minimum wage in your respective province or territory under the program.

Proposed Changes

The government will provide an additional $448.5 million over five years, starting in 2018–19, to the Youth Employment Strategy, which translates to a doubling of the number of job placements funded under the Canada Summer Jobs program in 2019-20.

What This Means for Your Business

With additional funding, CSJ will likely accommodate more applicants, as well as extend the application deadline. They will also be able to accommodate larger scope projects that require more students.

2) Natural Sciences and Engineering Research Council (NSERC)

NSERC is a granting agency of the government of Canada that provides grants for research in the natural sciences and in engineering. The agency promotes discovery by funding postsecondary professors and students and fosters innovation by encouraging Canadian companies to participate and invest in postsecondary research and training.

Proposed Changes

Starting in 2018–19, the government will invest $354.7 million over five years, and $90.1 million per year ongoing. The Government will also consolidate grant programs within NSERC into a single collaborative research and development grant program.

What This Means for Your Business

If you want to work with Canadian universities and require funding to cover R&D costs, you should see a simplification in the application process.

R&D Funding

1) National Research Council – Industrial Research Assistance Program (NRC – IRAP)

NRC Industrial Research Assistance Program (NRC IRAP) provides financial support to qualified small and medium-sized enterprises in Canada to help them undertake technology innovation.

Proposed Changes

The government will invest $700 million over five years, starting in 2018–19, and $150 million per year ongoing. The government will also raise the threshold for eligible projects under IRAP from $1 million to $10 million.

What This Means for Your Business

By widening the range of financial support available under IRAP, entrepreneurs can now look to IRAP for larger funding amounts. The NRC may also be accepting more projects than before, given the increase in overall funding. However, the NRC could also accept fewer projects and focus more on managing its current portfolio.

2) The Strategic Innovation Fund (SIF)

The SIF’s objective allocates repayable and non-repayable contributions to firms across all of Canada’s industrial and technology sectors.

Proposed Changes

To allow for more focused support for business R&D projects over $10 million, the SIF will move away from supporting smaller projects to support larger projects that can lead to significant job creation and shared prosperity for Canadians.

What This Means for Your Business

While it was never publicly stated, the SIF’s track record always demonstrated a preference for larger-scale projects. The new $10M threshold simply formalizes the scope of funding.

International Marketing / Export Funding

1) Global Affairs Canada

Global Affairs Canada (GOA) provides companies with advice, connections, and funding to help them explore new markets through a network of 1,300 trade commissioners in 161 offices around the world. They manage multiple trade promotion programs, such as CanExport, Canadian Technology Accelerators, Going Global Innovation, and Canadian International Innovation Program.

Proposed Changes

The government will provide up to $75 million over five years, starting in 2018–19, with $11.8 million per year thereafter, to Global Affairs Canada to establish a stronger Canadian diplomatic and trade support presence in China and the rest of Asia.

What This Means for Your Business

If you intend to export or market to Asian markets, such as China, your project will likely be prioritized for funding. Trade missions to Chile, Colombia, Mexico, Peru, Argentina, Brazil, Paraguay and Uruguay are also important markets that the Government seeks to further support.

New Funding

1) Women Entrepreneurship Strategy

From a funding perspective, women entrepreneurs will receive an increase in access to capital for growth and export financing, as well as venture capital.

More specifically, the Government will:

• Make $1.4 billion available over three years, starting in 2018–19, in new financing for women entrepreneurs through the Business Development Bank of Canada (BDC).
• Increase up to $200 million (from $70 million) investments in women-led technology firms over five years through the BDC’s Women in Technology Fund.
• Provide $250 million over three years, starting in 2018–19, through Export Development Canada (EDC) for financing solutions for women-owned and women-led businesses that are exporting or looking to begin exporting.
• Support women entrepreneurs in agriculture by creating and launching a new lending product in 2018–19 designed specifically for women entrepreneurs through Farm Credit Canada.

2) Intellectual Property (IP) Strategy

The government will invest $85.3 million over five years, starting in 2018– 19, with $10 million per year ongoing, in support of an enhanced IP strategy. The goal is to increase the IP literacy of Canadian entrepreneurs, and to reduce costs and create incentives for Canadian businesses to leverage their IP in global markets

For further assistance with government funding, please contact Sahar Ansary, Senior Project Engineer and Consultant at R&D Partners.