Our Appearance Before the Standing Committee on Science and Research

On Wednesday, November 19, 2025, Liam MacDonald, Director of Policy and Government Relations at the Canadian Chamber of Commerce, appeared before the Standing Committee on Science and Research.

Representing more than 400 chambers, boards of trade, and over 200,000 businesses, he delivered a clear message: Canada must strengthen its R&D ecosystem to stay competitive.

MacDonald pointed to Canada’s lagging R&D investment, accelerated U.S. policy action, and the growing connection between innovation, economic resilience, and national sovereignty. He called for sharper tax competitiveness, modernized R&D and IP incentives, and a workforce aligned with emerging innovation needs. His remarks underscored the urgency for bold, coordinated action to drive private-sector innovation and secure Canada’s long-term growth.

The full appearance and remarks can be viewed below.

Thank you for the opportunity to appear before you today on behalf of more than 400 chambers of commerce and boards of trade, and over 200,000 businesses of all sizes, sectors, and regions across Canada.

Research and development is foundational to modern economies. Strong R&D ecosystems drive innovation, enable new technologies, improve existing ones, enhance productivity, and strengthen competitiveness across entire value chains. The benefits extend far beyond individual firms: R&D generates knowledge spillovers, fuels long-term growth, and supports the creation of high-quality jobs.

Yet Canada’s economy is at a crossroads. Global competitors — particularly the United States — are rapidly expanding incentives to spur business investment, R&D, and technology adoption. At the same time, geopolitical uncertainty, supply chain pressures, and shifting global markets are reshaping the environment in which Canadian companies operate. Innovation leadership is increasingly tied not only to economic performance, but to national resilience and sovereignty.

However, Canada continues to lag international peers in R&D spending. In 2023, Canada spent 1.8% of its GDP on R&D, placing second-last in the G7 and below nearly two thirds of OECD countries, who spent an average of 2.7% of GDP on R&D. Persistent underinvestment constrains productivity, innovation, and long-term growth — challenges already reflected in OECD projections showing Canada’s GDP growth averaging about 1% in the years ahead.

This competitiveness challenge is sharpened by recent U.S. policy developments. The U.S. has repeatedly moved with speed and scale — first through the Inflation Reduction Act and most recently through the One Big Beautiful Bill Act, which extended full expensing for machinery, equipment, and R&D.

Canada’s slow response to past U.S. reforms contributed to a prolonged stagnation in non-residential business investment — which remains below 2014 levels. To avoid falling further behind, bold, coordinated federal action is needed to strengthen tax competitiveness, drive private-sector R&D, accelerate technology adoption, and position Canada for long-term economic resilience.

Budget 2025 introduces several positive measures such as early changes to the Scientific Research and Experimental Design (SR&ED) incentive, funding for talent attraction, sovereign public AI compute infrastructure, and enhanced venture and growth capital. These are welcome steps. However, the competitiveness gap facing Canadian businesses remains substantial, especially relative to recent U.S. innovation incentives. To close this gap, the Canadian Chamber recommends action in three priority areas:

First: Strengthening Canada’s tax competitiveness by offering a productivity and investment tax credit, modelled on Ontario’s enhanced 15% credit and the Atlantic Investment Tax Credit, to support new buildings, machinery, equipment, and software. We also recommend permanently extending the Accelerated Investment Incentive to allow full and immediate expensing of machinery and equipment. Permanence would give businesses long-term certainty to anchor production, innovation, and R&D in Canada.

Second: Modernizing Canada’s R&D, commercialization, and intellectual property incentives by accelerating long-overdue SR&ED reforms, implementing a pre-approval process, expanding eligibility to commercialization and digital innovation, and indexing expenditure limits to inflation. We also recommend implementing a national patent box regime that provides a preferential tax rate on income derived from IP developed and commercialized here at home — a proven tool in jurisdictions such as the U.K., Belgium, and France.

Third: Building the workforce Canada needs to support R&D growth and technology adoption by conducting a national needs assessment to align training with labour market demand, and ensuring fast, predictable foreign credential recognition for in-demand occupations.

We thank the committee for undertaking this timely and important study. Strengthening private-sector R&D is essential to Canada’s long-term competitiveness, productivity, and economic security. I look forward to your questions and to continuing the discussion.