The Organisation for Economic Co-operation and Development (OECD) released the June 2012 results of the OECD Economic Surveys for Canada’s macro-economic state of affairs. The report indicates that the economy is picking up, with a positive outlook for continued moderate output growth and inflation. The OECD also cites innovation as a priority on the government’s agenda.
“Boosting innovation can raise historically weak productivity growth to sustain living standards… Competitive pressures, which spur innovation, have recently intensified because of the high exchange rate, but further market opening in sheltered sectors like network industries and professional services would be beneficial.”
Currently, innovation is lagging in Canada, with limited business R&D productivity and a low patenting quota. Fostering innovation can contribute to healthy multi-factor productivity (MFP) growth; innovation thus emerged as the overarching theme of the survey, with recommendations to improving the current policy framework. The OECD calls for support focused more on “sharpening incentives and raising performance,” through SR&ED strategies like unifying the higher enhanced ITC rate with the lower general ITC rate to encourage companies to grow. The OECD further recommended reinstating capital costs in the eligible expenditure base for SR&ED.
Aside from SR&ED, the OECD recommended subjecting the Industrial Research Assistance Program (IRAP) and other R&D programs to in-depth cost-benefit analysis. One suggestion was to implement user fees as a recovery method for the high costs of expert advice, especially for companies with products on the path to commercialization.