[wwhchung]

Hi there. Claim 1 is not incorrect. I am not stating executive compensation is used to claim SR&ED. I am stating it is used to suppress net profits to qualify for the higher rate. Also,

Claim 2, there is no requirement for IP to be owned by the Canadian entity for its development to be qualified for SR&ED (I’ve verified this from multiple accountants and the CRA).

As for Claim 3, you realize that this is indefinite right?

[bhouston]

If you say these are major issues, how often have you seen these two instances in the real world as a percentage of total SRED claims? Are these theoretical concerns or do you know that these are very serious practical concerns about SRED?

Regarding Claim 1, you are advocating that company will sacrifice its growth in order to live off of SRED. The larger one’s SRED claims and the larger they are in respect to total expenditures, the more likely to gain scrutiny and audits. I’ve been SRED audited, it isn’t fun. If a company could make $1M, why couldn’t it make $2M? This seems like a contrived scenario.

Regarding Claim 2, if a company is not going to act in its own best interests, it doesn’t matter who owns the IP. The company could license it for nothing to other companies even if it owned the IP.

In both scenarios you are outlining companies acting against their own best interests. Maybe it is possible, but it doesn’t seem like a very common case. Do you have numbers to back it up, or just the theoretical possibility that it could technically happen?

[pkaler]

> Regarding Claim 1, you are advocating that company will sacrifice its growth in order to live off of SRED.

SRED zombies are a real thing. Companies that should otherwise fold keep living on. It's not that they are sacrificing growth, they are tying up productive resources.

https://twitter.com/tobi/status/369180245972090880

[wwhchung]

Yes, it happens a LOT. I can't point fingers (it's not polite, and I'm Canadian), but it's what prompted me to write the article.

And yes, it does matter who owns the IP. If a sale happens, the proceeds to to the residing country's tax base. If it's not in Canada, we lose out on those gains.

[bhouston]

Ownership of IP doesn't matter if the licensing of the IP is made in unrestricted or exclusive fashions.

[s73v3r]

Why can't you point fingers? If you know this is happening, which is supposed to be illegal, then blow the whistle.

[wwhchung]

Because it's not illegal as my post points out. It's a flaw in the structure.

[s73v3r]

So? Nobody says that you're supposed to claim they're breaking the law. You're just pointing out a company abusing the law.