The past two years have been marked by significant economic disruptions due to the COVID-19 pandemic and the Russia-Ukraine war. These events have highlighted the need for robust economic strategies to stabilize and grow the economy. The Canada Federal 2022 Budget Update addresses these challenges through a comprehensive plan focusing on three main pillars: investing in the people of Canada, fostering a green economic transition, and boosting productivity and innovation. This article delves into the third pillar, examining how the proposed changes and initiatives can benefit businesses and drive economic recovery.
SR&ED: Simplifying and Encouraging R&D The Scientific Research and Experimental Development (SR&ED) tax incentive program is a cornerstone of Canada’s R&D strategy. The government plans to review and simplify the SR&ED process to encourage more research and development activities within the country. This review will include evaluating eligibility criteria and potentially introducing a patent box regime to foster intellectual property creation and retention from R&D activities.
Investment Tax Credits for CCUS A new refundable investment tax credit for Carbon Capture, Utilization, and Storage (CCUS) is proposed, starting in 2022 and ending in 2030. The tax credit aims to support businesses investing in eligible CCUS expenses, with varying rates based on the type of project:
- 1. 60% for direct air capture projects.
- 50% for equipment to capture CO2 in other CCUS projects.
- 5% for equipment for transportation, storage, and use.
This initiative is expected to cost the government $2.6 billion over five years, growing to about $1.5 billion annually from 2026 until 2030. The rates will be reduced by 50% beginning in 2031 to incentivize earlier adoption of lower-emission technologies.
Significant Funding Initiatives: The 2022 budget includes numerous funding actions to support various sectors:
- 8 billion to transform and decarbonize industry and invest in clean tech and batteries.
- 4 billion for the Canada Digital Adoption Program (CDAP).
- 1.2 billion for life sciences and bio-manufacturing.
- 1 billion for the Strategic Innovation Fund.
- 1.9 billion for the National Trade Corridors Fund.
- 1.5 billion for regional development agencies.
- 1 billion for the Universal Broadband Fund, bringing the total to $2.75 billion.
- 1.2 billion for the National Quantum Strategy, Pan-Canadian Genomics Strategy, and the next phase of the Pan-Canadian Artificial Intelligence Strategy.
- 1 billion for the tourism sector.
Grants and Scholarships: The government has also announced support for several grant initiatives:
- 40.9 million over five years and $9.71 million ongoing for scholarships and fellowships for Black student researchers.
- 100 million over six years to assist research in net-zero emission agriculture.
- Doubling of Canada student grants until July 2023, with full-time students receiving up to $6,000 per year.
- 2.7 billion over ten years for essential programs and services for First Nations.
- 458.5 million to help low-income housing providers with low-interest loans and grants.
- 38.3 million over four years and $12.7 million ongoing to appoint new international recruits for the Canada Excellence Research Chairs program.
Innovation Initiatives
Innovation and Investment Agency A new agency will work with Canadian industries and businesses to make necessary investments for innovation, growth, and competitiveness. With proposed funding of $1 billion over five years, the agency will focus on projects with significant market potential and feasibility.
Canada Growth Fund The Canada Growth Fund, capitalized at $15 billion over five years, aims to attract private sector investment to meet national economic policy goals, including reducing emissions, diversifying the economy, and restructuring important supply chains.
National Research Council (NRC) The NRC will explore new ways to integrate leading university researchers and business partners to enhance innovation and modernization efforts.
Green Technology Investments To support Canada’s path to net-zero emissions by 2050, the government has proposed $183.2 million over seven years for greener construction in housing and buildings, along with ongoing funding for innovative construction materials research.
Supporting Canada’s Innovation Clusters With over 415 approved projects and $1.9 billion in funding as of December 2021, the government plans to provide an additional $750 million over six years to support the growth and development of Canada’s Global Innovation Clusters.
Innovation, Science, and Economic Development Canada Initiatives
- 1 billion over six years for the Strategic Innovation Fund, targeting critical minerals projects.
- 45 million over four years to strengthen Canada’s semiconductor industry.
- 47.8 million over five years to launch a new national lab-to-market platform.
- 2.4 million over five years to expand the use of ExploreIP on Canada’s IP marketplace.
Additional Innovation Initiatives
- SMEs can expense up to $1.5 million of eligible investments starting in 2022.
- Continued support for revitalization projects in East Montreal.
- Increased investments in innovation and R&D to position Canada as a global leader.
- 30 million over three years for the Centre for Aging and Brain Health Innovation.
- The Strategic Innovation Fund will support the Canadian Critical Minerals Strategy, creating jobs and growing the economy.
The Canada Federal 2022 Budget Update presents a comprehensive plan to drive economic recovery through strategic investments in productivity and innovation. By simplifying R&D processes, introducing new tax credits, and providing substantial funding for key sectors, the government aims to foster a resilient and competitive economy. Businesses across Canada stand to benefit significantly from these initiatives, paving the way for sustained growth and innovation in a rapidly changing global landscape.
Contact EVAMAX today to see how you can take advantage of the opportunities outlined in the 2022 Federal Budget!
