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Would love to have access to anonymized SR&ED claims data. I'll also bet that while 75% of the claimant's are small businesses, they only get < 10% of the $4B (remind you of anything)?

It's why I advocate for a lower hard cap as well. With a hard cap, it's likely that the total amount paid out is well under $4B, which means we can then go on and address how we can better distribute funding and change the evaluation process to not be as restrictive.

Or, it could have folded and made something else. Or any number of other scenarios. But debating SR&ED being good or bad is too theoretical and everyone can point to examples on all sides. This is why I chose a very specific issue with SR&ED and proposals on how to fix it.

I'm not stating that SR&ED does not have its benefits, but there are some glaring flaws that need fixing. Others include the SR&ED process itself, evaluation of SR&ED claims and more. However this is the first one I could concretely back up with examples and math and give real solutions to.

Your Canadian counterparts are incorrect, or they must not have read the post clearly. You are in fact able to deduct executive compensation against net income. You CANNOT claim excessive executive compensation for your SR&ED expenditures, but that is NOT what I'm indicating. If your counterparts still claim that this is not the case, they are pretty sh*tty accountants.

You are incorrect.

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

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.

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?

Yup. I chose to write about something I could put figures to rather than something that's much more subjective and I don't really have a good alternative for with data to back it up. I 100% agree though.

Bad unintended consequences was a nice way of phrasing 'it sucks and is draining money away from real R&D/innovation'

I agree that there are many other issues with SR&ED (including the one you mentioned above). I actually point out a few at the bottom of my post. :) I just chose to tackle one that I could put clear numbers and examples to and viable solutions.

Yup. Many more issues, but this is one that isn't subjective and I can provide possible solutions to, so its the first I wrote about. :)

I agree that there are many other issues with SR&ED (including the one you mentioned above). I just chose to tackle one that I could put clear numbers and examples to and viable solutions. With respect to the SR&ED process itself, that's going to be another post once I have a well thought out proposal and data to back it up. :)

Agreed there are many other fundamental issues with the program. However I chose to tackle rates first since it has strong examples and solutions. The other issues are more controversial and I haven't formulated a comprehensive fix for them yet. But I will in the future. :)

I'm sorry that you feel that way, but let me clarify that statement a bit. Finding them is difficult, not because people don't want to work here, but Canadians are usually the ones more willing to work at Canadian companies, so the overall tech talent pool is a bit smaller to work with. In the US, you've got people from all over the world vying for positions. Canada has to present itself as a technology hub to attract more international talent.

Retention is better, not necessarily because there is a lack of innovative companies. In fact, there are definitely a a number of great companies to work for in Canada that aren't the sweatshops that you mention (and I would like to count ours among the innovative and great places to work).

The retention aspect is more about the mentality of people in Canada when they join a startup. In silicon valley, there are A LOT of companies, and every week it seems like there's some hot new startup. Given that, a lot of tech people there have the mentality of hopping from company to company just to maximize their own short term gains. We personally don't feel that that type of employee behavior is healthy.

Compare this to another area in the US which has a healthy tech scene, but WAY better retention. Seattle. There are definitely a significant number of tech companies there (Amazon, Google, Facebook, MS, etc.) with great working environments. But the reason retention is better there is because it's a bit further away from the silicon valley hype.

Similarly, in Canada (Vancouver), we try to offer something very similar. Great work environment, competitive compensation and a general good tech place to work. As employer's, we will NEVER hold all the cards (heck, all our guys could go get a job at any tech company in the world, including silicon valley). It's just that the people we've managed to find up here have been more focused on long term growth potential than short term gains.

Yup, this is true. I updated my posts to reflect this. However once you get above 200k range, AMT starts to kick in and you can't deduct the full amount.

Edit: Your statement that you can deduct income tax is True IF you don't take the standard deduction. Basically in your deduction, you can choose to take the standard $5800 deduction, or deduct the total taxes you paid for california (at $100k, it is only marginally over $5800). At over 200k, you are likely to get hit with AMT, so the deduction would be limited.

I've updated the tax rates above to be more indicative of the adjusted rates in the best case scenario, but California vs. Canada is still VERY close.

Actually, here are the 100k tax rates for Waterloo, Ontario, Canada vs. SF, California: Waterloo:

26% Federal + 11.16% Provincial = 37.16% http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

San Francisco: 28% Federal + 9.3%x(0.72) State = 34.7% <-- (9.3%x0.72 because you can deduct your state taxed amount in certain scenarios)

http://www.efile.com/tax-rate/federal-income-tax-rates/ https://www.ftb.ca.gov/forms/catxrate_exmpt07.shtml

Once you get above 174k/year, it's sill similar, with:

Waterloo: 29% Federal + 11.16% Provincial = 40.16%

San Francisco: 33% Federal + 9.3%x(0.72) State = 39.7%

So at 100k, Canadian taxes are very slightly higher higher, and is almost even at 174k.

If you're working at a startup, Canada may even be more advantageous because of how capital gains taxes are treated on privately held CCPC's. Also, you have health care. :)

We're a tech startup in Vancouver. If you're interested in coming back to Canada, please look us up. We've build up our company to be very much like what you can find in the US (i.e. ownership, high quality of talent, cool things to work on). We're always actively hiring, and we compensate very fairly, since we know we're looking for the best hackers in the world. :)

Ya, I know this sounds like a pitch, but if anyone in the US is thinking of moving back to Canada, please contact us. We've written about our reasons for opening up our primary dev shop up here, and one of them was specifically for the really great devs that wanted a cool place to work in Canada.

Our website is www.athinkingape.com It might look like a social games development shop, but it's actually much more. ;)

Hi there. While I agree with some of your points, i.e. issues with certain large companies being anti-competitive in the startup environment rather than being supportive, and the fact that the tax incentives offered could be better structured to be more accessible to technology startups, I still think Canada is a great place to build a company. Why? Well:

1. Canada does have great tech talent. Finding them is a bit more difficult, but talent retention is much better. And if you reward your employees well (i.e. competitively with any other company out there), you can attract world class talent.

2. Building a great company does not necessarily mean raising a huge VC round. In fact, if you can build a business that is growing quickly without the need for VC, they'll come looking for you. One thing that some people get hung up on is that you absolutely need to get funded to start a company. That's not true at all. Although, when the time does come to raise money, most US investors are actually comfortable with investing in Canadian companies.

There are a few things I do notice though. Canadian culture is a bit more conservative (i.e. less willing to take big risks, which also explains a bit of the lower valuation). It makes a bit of sense, since most of the larger industries are around 'traditional' sectors, like natural resources and finance. But this is changing. And as more and more successful tech companies emerge, the startup community will only get stronger.

Also, the tax incentives are well intentioned, however the way they're structure has been a 'one size fits all' approach. The rules put in place make sense for some industries (e.g. medical R&D), but make it a bit inaccessible to tech startups without a lot of effort.

Yup: http://www.athinkingape.com/events/

Hope to see some of you there.

As a former Waterloo co-op (and founder of a YC company), I'd have to say that the 4 month co-op program added a LOT of value. I learned more in each of those 4 month co-op terms than each of my school terms. Additionally, from all my interviewing experience (i.e. interviewing for full time hire's), those that come from a co-op program (any co-op program, even UofT's) are way better prepared and have much more practical knowledge.

This is a core reason why we still recruit heavily in Waterloo, for both co-op's and full-times. In fact, we're going to be in Waterloo on January 19th, 2012 for a tech talk with YC and a number of other YC companies. Please feel free to drop by if you're in town.

Thanks for the feedback. We'll be adding a 'join' option to widgets so you don't automatically join groups when you're logged in and visit a page with a widget.

You get the ability to direct your messages to what you prefer. Say a friend added your e-mail to the group. By signing up, you can route the messages to your gtalk or sms or web instead.

Nope. They will get an e-mail or SMS or gtalk message, and they would reply simply by replying to that e-mail/SMS/gtalk bot. Your friends don't have to sign up. But as the group creator, you need to add your friends' contact information to add them to the group.

The article's statements on the problems with SOA don't accurately reflect reality. For example, "SOA requires you to do a whole load of up-front design and specification that's very difficult to change after." This is not a problem with SOA, rather than a symptom of poor change management, which can occur in any code base whether you are using SOA or not. Similarly, his "strange loops" issue is really an issue of poor dependency management/mapping. You can easily write a program that exhibits the same problems.

One valid issue with SOA is data consistency. Dealing with data consistency across services is a real problem, and this may contribute to extra development time. But by no means does this indicate that SOA is the opposite of agile. There are agile development benefits in SOA, and I don't feel that the drawbacks outweigh these benefits.