TORONTO, Nov. 14, 2012 /CNW/ - Contingency-based fee arrangements have
become a vital component of the tax incentive system for promoting
innovation among Canadian businesses, according to the Canadian
Institute of Chartered Accountants (CICA).
The federal government has been seeking input on how contingency fee
arrangements with third-party preparers affects Canada's tax incentive
program for scientific research and experimental development (SR&ED).
The CICA recently provided its views to the Department of Finance
Canada and the Canada Revenue Agency.
"Contingency fee arrangements emerged because companies of all sizes
required a cost-effective way to prepare the complex tax credit claims
associated with innovation investment," said Gabe Hayos, the CICA's
In fact, the CICA submission noted government statistics show that
two-thirds of businesses making claims rely on third parties to prepare
them. A survey of CICA members supported the government's finding.
The survey was just one aspect of the research carried out by the CICA
to gain better insights about the issue of contingency-based fee
arrangements. The Institute also consulted with a working group
composed of SR&ED specialists from Canada's seven largest accounting
firms. In addition to gaining their insights, the individuals were
polled to compile confidential data regarding the nature and extent of
contingency-based billing practices.
"Many businesses simply do not have sufficient in-house resources with
the highly specialized mix of scientific and tax knowledge needed to
assess eligibility, prepare the claim and compile supporting
documentation," explained Hayos. "We believe these businesses and the
system's overall administration benefit from quality claims."
The CICA submission also confronts suggestions that contingency fee
arrangements may result in an undue proportion of government innovation
spending being paid to third-party consultants.
Based on research compiled, the CICA's submission revealed that
consultant fees of the seven largest accounting firms amounted to just
3.7 per cent ($133.9 million) of the $3.6 billion paid annually by the
government for SR&ED credits. Of these, contingency-based fees amounted
to just 2.3 per cent ($83.27 million) of the credits paid.
"Given the size and complexity of the SR&ED program, we firmly believe
that the amount of contingency-based fees paid to third-party preparers
is reasonable in the circumstances," stressed Hayos. "The ability to
engage third-party preparers on a contingency-fee basis often allows
companies to increase innovation spending which is a primary objective
of the government."
The CICA's submission is available online (www.cica.ca/contingencyfees)
Chartered Accountants (CAs) are Canada's most valued, internationally recognized profession of
leaders in senior management, advisory, financial, tax and assurance
roles. Through their integrity, expertise, and internationally
recognized qualification standards, Canada's 82,000 CAs sustain their
influence and leadership position both in Canada and globally. As
trusted business advisors to Canadian organizations of all sizes,
Canada's CAs foster confidence in Canadian business and contribute to
the health and sustainability of Canada's capital markets and economy.
The Canadian Institute of Chartered Accountants (CICA) represents
Canada's CA profession both nationally and internationally. The CICA is
a founding member of the International Federation of Accountants (IFAC)
and the Global Accounting Alliance (GAA).
SOURCE: Canadian Institute of Chartered Accountants
For further information:
or to arrange an interview, contact:
Tobin Lambie, Manager, Media, CICA