OTTAWA – The Conservative party plans to overhaul the way Ottawa spurs Canadian innovation by moving away from subsidies and reforming the tax code if it forms government in the next election, the party’s innovation critic told The Logic. 

“Some industries, when you say, ‘Look, the subsidy game is over,’ they’re like, ‘That’s great.’ Others are like, ‘What do you mean it’s over?’” Conservative MP Rick Perkins said in a wide-ranging interview.

“It doesn’t mean there isn’t going to be money available, but it’s not going to be in subsidies the way it is now.”

Perkins stressed that he couldn’t speak to specific policies or program cuts that will appear in the Conservative platform when an election is called. In his view, though, signature federal programs like the Canada Growth Fund and Strategic Innovation Fund (SIF) aren’t producing results, and even tax incentive programs like Scientific Research and Experimental Development (SR&ED) need an overhaul.

Innovation, Science and Economic Development Canada lists 49 programs and initiatives intended to support various sectors of the innovation economy, from skills development to commercialization support. Some offer grants and subsidies, while others provide repayable financing. Some simply connect businesses with available government services.

But when it comes to supporting innovation and growing the tech sector, the Conservatives have two aims, he said: keeping Canadian-grown ideas from leaving the country and encouraging productivity and investment.

“A big part of our productivity problem is that we need to own what we create, and that’s the starting point. Our programs should be focused on that,” Perkins said.

That includes making Canadian venture capital available to startups, directing government support to domestic businesses rather than foreign firms and ensuring Canadian intellectual property stays in Canada, he said. 

One way to do that is with the tax code. Conservative Leader Pierre Poilievre has promised to name a tax-reform task force of entrepreneurs, investors, farmers and workers to help shape his fiscal policy within 60 days of taking office. 

“Tax credits are a very effective way to encourage research and development, but they’re not broadly used,” Perkins said. 

A CPC government could look at tax innovations similar to publicly traded flow-through shares typically used in the energy and mining sectors as a model for other industries, Perkins said. The special shares give investors a tax break while helping certain mining corporations finance their exploration and project development activities. Cleantech firms have previously lobbied for the same kind of system, arguing their innovations can be as capital-hungry and risky as resource projects.

Perkins believes a Conservative government should make changes to the Liberals’ flagship $3-billion SR&ED tax credit, which is meant to incentivize firms from local startups to foreign conglomerates to innovate and develop products in Canada.

A long-standing gripe about the program is that it rewards big multinational firms disproportionately, and the resulting intellectual property doesn’t necessarily stay in Canada. “We’re using taxpayer money to subsidize inventions by foreign multinationals,” Perkins said. 

In the last fall economic statement, the finance department said the share of credits claimed by Canadian-controlled businesses stands at 75 per cent, yet the Liberals proposed reforms to the program in December. They also promised to establish a new “patent box” system that would give all firms a tax break on IP they hold in Canada.

Several ideas raised by Perkins, including limiting taxpayer investment in subsidiaries of foreign firms, closely reflect proposals made by the Council of Canadian Innovators, said president Benjamin Bergen. The Tories have signalled the possibility of implementing some of them within the first 100 days of forming government, he added.

“I think the real positive thing that we’re hearing from the Conservatives is they get where the money is,” said Bergen, who is encouraged to hear the Tories focus on ways to keep IP and corporate data stores in Canada.

The $18.5-billion SIF, Ottawa’s flagship fund, typically provides repayable financing to both homegrown firms and multinationals for major R&D and expansion projects. Some companies do receive grants. 

But the Liberals have also spent significantly on other innovation programs targeting areas Perkins identified as priorities. For example, they’ve completed two rounds of the Venture Capital Catalyst Initiative, which helps increase funding for startups, and recently pledged $1 billion for a third. Ottawa has also backed a patent collective for cleantech and programs like the $90-million ElevateIP to help startups secure their ideas.    

How much a Conservative government would be willing to spend, or forgo in tax revenue, compared to the Liberals remains unclear. One of Poilievre’s key slogan-style promises is to “fix the budget” and bring it into balance “as soon as possible,” though he hasn’t yet offered specific timelines or targets.

The Liberals project a ​​$48.3-billion deficit in 2024-25, and Perkins expects all departments will have to contribute to the belt tightening required to wrestle that number down. The hope, he said, is that the changes will improve Canadian productivity, which will in turn grow the economy and tax revenue along with it. 

“If we can’t produce growth then we’ve done something wrong,” Perkins said. “That’s what our focus is going to be on. It’s going to be on Canadian productivity, growth, on Canadian-owned technology and commercializing it.”

With files from Murad Hemmadi