This presentation discusses how best to support innovation as part of ensuring Canada's economy is competitive when it comes to growing GDP and good quality jobs

1. What are Subsidies and
How do you best focus on
innovation?
PAUL YOUNG CPA, CGA
OCTOBER 7, 2020

2. Paul Young - Bio
• CPA, CGA
• Academia (PF1, FA4 and MS2)
• SME – Risk Management
• SME – Close, Consolidate and
Reporting
• SME – Public Policy
• SME – Emerging Technology
• SME – Financial Solutions
• SME – Supply Chain Management
• SME – Planning and Forecasting
Contact information:
Paul_Young_CGA@Hotmail.com

3. Agenda
 What is a business subsidy?
 Cost of Business Subsidies / OECD
 Tax Code
 Clean Technology / Direct Subsidies
 Blog – Subsidies
 Superclusters
 Stock Market
 What’s next

4. What is a business subsidy?
A subsidy is a benefit given to an individual, business, or institution, usually by the
government. It is usually in the form of a cash payment or a tax reduction. The
subsidy is typically given to remove some type of burden, and it is often considered
to be in the overall interest of the public, given to promote a social good or an
economic policy.
Source - https://www.investopedia.com/terms/s/subsidy.asp

5. OECD and Business
Subsidies
Source -
http://www.oecd.org/trade/
why-subsidies-are-bad-
global-competition/

6. Tax Code / Subsidies
 Tax deduction (eligible)
 R&D Innovation
 Capital Cost Allowance
 Manufacturing processing / deduction
 Other deductions
• Direct subsidies, i.e. cash payments means that government is picking and choosing winners and losers.
Government role is set policy for all businesses.
• The tax code for all countries need an overhaul to ensure fairness more fairness when it comes to tax
deduction
• Too many economists argue that tax deductions are subsidies. They are not. You need to qualify for any tax
deductions.
• R&D credits are heavily audited to ensure they are valid
• Companies used capital equipment to as part of the production process. Capital equipment needs to be
written down
• Corporate taxation - https://www.slideshare.net/paulyoungcga/how-best-to-design-corporate-
taxation-policies-as-part-of-supporting-economic-growth

7. Clean Technology / Direct Subsidies
Source - https://www.eia.gov/todayinenergy/detail.php?id=35952
https://www.bnnbloomberg.ca/
awash-in-red-ink-canadian-
clean-tech-struggling-despite-
ottawa-s-green-goals-1.729679
https://www.washingtontimes.com/ne
ws/2015/apr/27/obama-backed-
green-energy-failures-leave-
taxpayers/

8. Blog - Subsidies
Here is what I told a Liberal?
You appear to be anti-business as such likely will not read my posts, but will take the NDP at their word when it comes to taxation, right?
 Corporation pay carbon tax, excise taxes, payroll taxes, royalties, corporate income tax - https://www.slideshare.net/paulyoungcga/how-corporate-and-business-
taxation-flows-to-government
 Corporate Tax planning - https://www.cfo.com/staffing/2019/07/tax-reform-spurs-major-unintended-
consequence/?utm_campaign=CFODailyAlert&utm_nooverride=1&utm_source=CFO-email&utm_medium=email&utm_content=CFODailyAlert_Wednesday_2019-7-
24&utm_term=staffing
 Mutual funds and pension funds invest in corporations - https://www.investopedia.com/university/mutualfunds/mutualfunds.asp
 Top 1% - https://www.slideshare.net/paulyoungcga/2019-election-top-1-wealthiest-canada-june-2019
 Many corporations do not get direct business subsidies - https://www.investopedia.com/articles/basics/11/introduction-to-government-subsidies.asp (Direct subsidies
are loans, grants, etc.)
 Tax deductions are not subsidies. Corporations have to qualified for tax deductions - https://taxfoundation.org/corporate-tax-rates-around-world-2018/ - Countries need
to be competitive with all their tax, environmental and other government policies.
 There are rules around income movement it is called transfer pricing. The rules have change based on BEPS -
https://www.osler.com/en/resources/regulations/2018/canada-begins-ratification-process-for-multilateral-tax-convention-to-implement-beps
 You want to fixed income taxation then go after the tax code - https://www.brookings.edu/research/a-golden-opportunity-to-simplify-the-tax-system-options-for-
reforming-a-complex-tax-code/
 Governments around the world need to go after tax havens - https://medium.com/@nslewis/tax-havens-make-gdp-screwy-c241430447d9 - Liberals refused to go after
tax havens as the panama papers have shown there are liberals with holdings in tax havens - https://www.cbc.ca/news/business/stephen-bronfman-trudeau-paradise-
papers-1.4382511
 Trudeau and Morneau have trust funds. Maybe it is time to go after trust funds - https://www.advisor.ca/tax/tax-news/cra-to-demand-more-info-on-trusts-beginning-in-
2021/
 Clean technology gets direct subsidies and you do not mention that issue, why? https://business.financialpost.com/commodities/energy/total-destruction-of-the-market-
investments-in-clean-tech-cool-off-as-subsidies-ends - I guess you are ok with subsidizing power under the FIT agreement -
https://torontosun.com/news/provincial/ontario-lost-up-to-1-2-billion-selling-clean-energy-at-a-loss-engineers
 Many # companies are just an easy way for people to set up a small business. Small business has already told the Liberals their tax policies are harming them, and you say
nothing, why? https://www.slideshare.net/paulyoungcga/small-business-under-attack-by-government-canada

9. Superclusters
Source - https://www.pbo-dpb.gc.ca/en/blog/news/RP-2021-024-S--innovation-superclusters-
initiative-preliminary-analysis--initiative-supergrappes-innovation-analyse-preliminaire
• Canada has struggle for years with innovation spending – Canada is not even in the top 10% -
https://www.rdworldonline.com/global-rd-investments-unabated-in-spending-growth/
• Canada has issues with competitiveness due to taxes like carbon taxation along with excessive regulations -
https://www.slideshare.net/paulyoungcga/how-to-fix-competitiveness-through-government-policy
• Canada created new entities to managed the funding of supercluster – See slide 17 for an example
https://www.slideshare.net/paulyoungcga/aquaculture-fish-farming-and-harvesting-analysis

10. Stock Market
• The role of government is set policies that will encourage economic growth -
https://www.slideshare.net/paulyoungcga/stock-market-what-is-happening-with-the-equity-markets
• Government has struggle with returns from their clean technology initiatives -
https://thelogic.co/news/exclusive/liberals-600-million-cleantech-fund-is-losing-money-and-struggling-to-
find-investments/
• I have supported the concept of all Universities and Colleges being clusters.
https://www.slideshare.net/paulyoungcga/2019-election-innovation-and-rd-canada-2014-to-2017

11. What’s next
 Next government will need to look at all business subsidies as way to gradually
phased them out.
 WTO needs to reform including address direct business subsidies
 All countries need implement BEPS as well as other tax reforms (Tax code)
 Governments need to stop throwing money at clean technology via carbon
taxation. Businesses need to be viable without direct subsidies
 More balance between the environment and the economy needs to happen.