CALGARY, July 12, 2012 /CNW/ - In a report published today by The School
of Public Policy, author Ken McKenzie argues that Budget 2012 was a
step in the wrong direction when it comes to supporting Research and
Development in Canada.
His report contrasts effective subsidy rates for R&D activities pre- and
post-Budget 2012 and finds a series of troubling distortions.
"The proliferation and variation in effective subsidy rates for R&D
offered through the tax system is distortionary, inefficient and lowers
the overall efficacy of government support for R&D in Canada," he
Specifically, McKenzie argues that the changes found in Budget 2012
amplify favouritism towards smaller businesses versus large
corporations without any body of evidence indicating that this is
advantageous to the economy. His analysis shows that, pre-budget, the
subsidy rate for small corporations was 1.47 times larger than that for
large corporations, but this ratio increased to 1.72 post-budget.
McKenzie also questions the bias towards labour-intensive R&D versus
capital-intensive R&D. He argues that the variation in subsidy rates
across business inputs distorts firms' production decisions and
unjustifiably favours firms with higher labour-intensive R&D.
While the federal government scaled back its support for R&D in Budget
2012, McKenzie argues that "a better approach would have been to lower
the overall subsidy rate across the board."
The report can be found at www.policyschool.ucalgary.ca/publications
SOURCE The School of Public Policy - University of Calgary
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