Paradis Says Canada Must Close Research Investment Gap

Canadian Industry Minister Christian Paradis said the federal government must address the country’s laggard status among developed economies in terms of private investment in research.

Canada ranks below the median of Organization for Economic Cooperation and Development countries in private sector research spending, OECD data show. Paradis said he’s also concerned that Canada lags behind the U.S. in productivity, and said the government plans to rely more on direct funding rather than tax breaks to encourage that investment.

“There’s a gap out there that needs to be addressed,” Paradis said by telephone from Berlin today. “We need to make sure that the incentives that we put out there are really incentives.”

In its last budget, the government scaled back a tax credit designed to encourage businesses to invest in research and development. The government removed capital spending from the costs that can be claimed for the credit and reduced the rate of the credit to 15 percent from 20 percent.

Research in Motion Ltd., the Waterloo, Ont.-based maker of the BlackBerry smartphone, has said the company claims about C$150 million ($151 million) per year through the credit, and that amount would be reduced by about one-third under the changes.

“The manufacturing sector is still alive in the country, but it can no longer rely on a low currency value for competitiveness,” said the minister, who is visiting Germany this week to study that country’s manufacturing sector.

The government will consider investing any savings from reducing tax credits into direct funding for businesses, Paradis said.

Before it's here, it's on the Bloomberg Terminal.