Harley Finkelstein Calls for Streamlined SR&ED Process as Canada Commits $600 Million to Program Enhancements

Harley Finkelstein, President of Shopify, recently voiced strong criticism regarding Canada's Scientific Research and Experimental Development (SR&ED) program, asserting that its current structure impedes entrepreneurial speed. In a social media post, Finkelstein stated, > "Entrepreneurs thrive on speed. But SR&ED slows them down. Canada doesn’t lack ambition or talent. We lack a system that actually helps. The fix isn’t more funding. It’s a smarter process." His remarks underscore a growing sentiment within the Canadian tech sector for significant reforms to the long-standing federal tax incentive.

The SR&ED program, administered by the Canada Revenue Agency (CRA), is the largest federal initiative designed to encourage research and development (R&D) in Canada through tax incentives. It offers tax deductions for qualifying expenditures and investment tax credits, with Canadian-controlled private corporations (CCPCs) typically receiving a refundable credit at an enhanced rate. Despite its intent to foster innovation, the program has faced persistent criticism for its complexity and the administrative burden it places on businesses, particularly small and medium-sized enterprises (SMEs).

Finkelstein's call for a "smarter process" directly addresses concerns about the program's operational efficiency. Industry feedback and reports, including those from the Information Technology and Innovation Foundation (ITIF), highlight that Canada's SR&ED application process, with its multiple forms and rigorous compliance requirements, is considerably more burdensome than in many other jurisdictions. This administrative load, coupled with lengthy processing times—where even refundable claims selected for review can take up to 180 days to process—can indeed slow down agile businesses that rely on quick access to capital.

In response to widespread calls for reform, the Canadian government has initiated two phases of consultations on the SR&ED program throughout 2024, aiming to modernize and simplify it. Budget 2024 further announced an additional $600 million over four years, beginning in 2025-26, with an ongoing commitment of $150 million annually, specifically for future enhancements. These funds are intended to boost research and innovation by addressing existing challenges and streamlining the program.

The ongoing dialogue reflects a broader recognition that Canada's private sector R&D spending lags behind many peer nations. Stakeholders advocate for changes that not only simplify the application but also ensure the program effectively incentivizes R&D across all firm sizes, addressing issues like the "Why" and "How" eligibility tests and potential disincentives for growth. The focus now shifts to how the newly allocated funds and consultation feedback will translate into tangible improvements that align the SR&ED program with the speed and needs of modern entrepreneurs, fostering a more robust innovation ecosystem in Canada.