Thursday, December 06, 2018

Space Mining and Innovation Should Be Encouraged Through the Tax Code, According to NRCan and CATA Alliance

          By Chuck Black

Two new initiatives, the first generated through Natural Resources Canada (NRCan), the Federal government ministry responsible for natural resources, remote sensing and regulations under which Inuvik based satellite ground stations operate (but that's a different story), along with a second initiative originating from the Ottawa ON based Canadian Advanced Technology Alliance (CATA Alliance), are both advocating changes to the Federal tax code which (they feel) will encourage independent and innovative private sector activities to grow the Canadian space sector.

These new initiative fly in the face of traditional space advocates such as the #DontLetGoCanada coalition, which argue that large lump sums of Federal funds must be distributed to specific contractors, such as Westminster CO based Maxar Technologies (a US based company), in order to build specific projects, such as a "3rd generation Canadarm" for the proposed NASA Deep Space Gateway, in order to encourage innovation and speed the development of Canadian space activities.

Here's what we know about those new initiatives.

As outlined in the June 8th, 2018 post, "NRCan Explores Space Mining," the initial incentive for NRCan to move into this area was as part of the consultative process to generate and develop the upcoming Canadian Minerals and Metals Plan (CMMP). As outlined in the earlier post: 
NRCAN and other officials were cautious about entering into public discussion on the forum, possibly over fear of a backlash from other government departments such as the National Research Council (NRC) and the Canadian Space Agency (CSA), who have traditionally taken the lead in this area and are known to jealously guard their turf in interdepartmental meetings.
But the initiative moved forward and led to a series of public presentations at the 2018 Canadian Space Summit, which was held in Ottawa ON from November 27th - 29th. The track included presentations from:
Most of the conversations which took place during the event paralleled to a surprising degree items previously outlined in the November 1st, 2018 post, "The REAL Path Towards Revitalizing the Canadian Space Industry."

That post noted the similarities between the mining and space industries and suggested that the current worldwide explosion of private sector space accomplishments has nothing whatsoever to do with simply shoveling new government money into traditionally structured programs and everything to do with creating the correct tax incentives needed to support the growth of a new industry.

The next step in the NRCan plan is another meeting to generate consensus. It's expected to take place in March 2019 in Toronto ON at the annual 2019 Prospectors and Developers Association of Canada (PDAC) Convention, which will be held in Toronto ON from March 3rd - 6th, 2019.

As outlined in the December 3rd, 2018 CATA Alliance press release, "YES Canada to Adopting 5 All Party Election Platform Recommendations, Sign & Share the CATA E-Petition," another organization is attempting to move down a different path toward innovation, although the expected end result is also wrapped around tax reform.

According to the press release, CATA Alliance is "advancing important tax, finance and innovation advocacy and we need your help in amplifying key recommendations to decision makers."

To that end, the organization is asking members to sign an online petition committing the leaders of "the five Federal political parties" to embrace five key policy recommendations. Those recommendations include:
  • Recognizing that "while Canada remains strong in terms of the quality and impact of its scientific output, it is lagging further and further behind in its ability to commercialize that output and generate wealth.
  • The creation of "a 21st century tax commission" focused on "improving the nation’s support for innovation through fiscal measures." The petition suggests that all tax measures should be tested "through robust public consultations," and incorporated into a "final report" which would be delivered within the next "twelve months.
  • The completion of a scientific research and experimental development (SR&ED) tax credit review to assess proposed improvements and then test them through "robust public consultations." SH&ED credits are one of the primary Federal tax programs encouraging private sector innovation, although there are certainly questions as to the efficiency of the program. 
  • Supporting the development of "a modern IP system with appropriate fiscal measures for IP (intellectual property) exploitation in Canada" and to provide "assistance to cover some of the costs of the patent process." IP issues are a common concern in the space industry and were most recently discussed in the March 16th, 2018 post, "Looks Like Intellectual Property Issues Were Addressed in the 2018 Federal Budget." In essence, IP issues are well worth looking into.
  • Publish benchmarking metrics comparing Canada to other leading countries building innovative capacity. Of course, some of those surveys, such as the one discussed in the August 17th, 2016 Global News post, "Canada ranks 15th on Global Innovation Index: Here’s where we fall behind," have already been published and its unclear whether or not a new survey would provide any information not already publicly available. 
Taken together, these points are useful measures designed to encourage political parties to discuss and improve their innovation policies and tax regimes. It's a welcome addition to the public discourse in this area and absolutely of assistance to the Canadian space industry.

On the other hand, there is also precious little difference between encouraging innovation by holding more meetings (the path chosen by NRCan) and encouraging innovation by signing a petition (the path chosen by CATA).

Neither approach seems likely to bear fruit before the upcoming Federal election, which is expected to occur on or before October 21st, 2019. The approaching deadline kinda suggests that time is running out to achieve real political change in the near future.

So while it's good that we're finally creating a consensus that the tax system might hold the secret to encouraging innovation and building robust Canadian industries, we now need to come up with a plan able to engage both the electorate and the political mandarins before the next election.

We've got less than a year. 
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

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