Prime Minister Mark Carney recently revealed a surprising source of insight behind a significant overhaul of a key government innovation policy. During a speech to the Montreal Chamber of Commerce, he recounted seeking assistance from an unlikely partner: Shopify.
The challenge? The Scientific Research and Experimental Development (SR&ED) tax credit – a program designed to fuel innovation among Canadian businesses – had become bogged down in bureaucratic inefficiency. It was a frustrating hurdle for the small and medium-sized companies it was meant to help.
Carney’s team turned to Shopify, the Ottawa-born e-commerce giant, for a solution. The response was swift and direct. Within 48 hours, Shopify delivered a concise directive: “Do this.” After three months of internal review, the government implemented Shopify’s recommendation, to the amusement of the audience.
The SR&ED program, distributing roughly $4.5 billion annually to over 22,000 firms, is considered a cornerstone of government innovation funding. However, its complexity had created a parallel industry of consultants, absorbing a substantial portion of the available funds – estimated between 25% and 33% – instead of directly supporting research and development.
Shopify president Harley Finkelstein publicly voiced his frustrations with the SR&ED application process, highlighting the need for simplification. He even personally delivered a memo outlining his concerns to Finance Minister Francois-Philippe Champagne, who was lauded for his receptiveness.
The recent federal budget reflects many of Finkelstein’s proposals, including a shift towards upfront funding approval rather than post-project rebates. This change is expected to encourage bolder, more innovative projects by assuring companies of financial support from the outset.
The budget also doubles the annual SR&ED expenditure limit to $6 million and plans to leverage artificial intelligence to streamline the audit process. These changes represent the most significant modernization of the program in three decades, according to the Council of Canadian Innovators.
This shift marks a “relationship rebooting” between the government and the tech sector, a change welcomed by industry leaders. The government’s willingness to directly consult with companies like Shopify signals a new era of collaboration and responsiveness.
Experts emphasize the importance of transparency in these interactions. While engaging with industry leaders is valuable, maintaining openness is crucial to avoid undue influence. Concerns remain about existing gaps in lobbying regulations, particularly regarding executives who engage in lobbying as part of their broader roles.
Looking ahead, the focus is on building a stronger, more sovereign Canadian tech ecosystem. The Council of Canadian Innovators aims to foster consensus within the industry to provide the government with clear guidance on policies beyond SR&ED, ensuring that federal funding truly supports the growth of domestic firms.
The SR&ED story is more than just a policy change; it’s a testament to the power of direct engagement and a signal that the government is listening to the voices shaping Canada’s future in the technology landscape.
