By: Khalid Eidoo

The table below illustrates the effect of the proposed changes in the 2012 Federal Budget to the Scientific Research and Experimental Development (SR&ED) program for companies operating in Ontario, Alberta and British Columbia. In order to simplify the comparision, the table below assumes that the Ontario Research and Development Tax Credit (ORDTC) has been renounced, and that the proxy method is being used, and all companies are Canadian Controlled Private Corporations (CCPC) operating under the small business limit with respect to net taxable income.

Ontario    2012       2013      2014
============================
Labour......68.5%.....66.4%......64.3%
Contract....41.5%......33.2%.....33.2%
Materials...41.5%.....41.5%......33.2%
Leases......41.5%.......41.5%............0%
Capital.....37.6%.......37.6%............0%

BC               2012       2013      2014
==============================
Labour........68.5%.....66.4%......64.3%
Contract.....41.5%......33.2%......33.2%
Materials...41.5%......41.5%......41.5%
Leases........41.5%.......41.5%............0%
Capital.......41.5%.......41.5%............0%

Alberta     2012       2013      2014
============================
Labour......68.5%.....66.4%......64.3%
Contract....41.5%......33.2%.....33.2%
Materials..41.5%......41.5%......41.5%
Leases.......41.5%.......41.5%............0%
Capital......41.5%.......41.5%............0%

The scenarios above demonstrate the reductions to CCPCs. Large businesses, foreign companies operating in Canada and Public Corporations are affected much more greatly by the reductions in the program. For more information regarding the reductions to these types of companies, please contact us.

Given the dramatic reduction in

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