The Competitive Alternatives, G7-2008 Edition, is a comprehensive, international survey conducted by KPMG. It demonstrates that Canada's business cost advantage in R&D are the most attractive among major industrialized countries namely: the U.S., U.K., France, Germany, Italy and Japan.

Canada's cost advantage in research and development is 3.7% over the United States.

Most Canadian industrial R&D is performed in Ontario. About half of Canada's Top 100 corporate R&D spenders are located in Ontario.

In Ontario, we enhance Canada's 3.7% R&D cost advantage by offering a wide range of additional tax incentives and R&D support programs, a network of internationally recognized researchers and research institutions and an excellent telecommunications and industrial infrastructure.

For example:

• Internationally competitive salaries. In knowledge-intensive activities, wages, salaries and other forms of compensation such as stock options are major cost items. In Ontario, payroll taxes are lower than those in any G7 country. Other programs can help lower compensation costs even further, such as the Ontario Research Employee Stock Option Credit.

• R&D infrastructure. Government-funded research councils, Centres of Excellence and funding programs help bring together researchers from private companies, universities and public research institutes. Ontario's hard infrastructure—telecommunications and transportation—provides seamless international links.

• Highly educated and skilled researchers. Billions of dollars spent annually in R&D at private companies, universities and public research institutes support a large Ontario community of first-class scientists and engineers. The province of Ontario's 20 universities and 24 colleges of applied arts and technology generate a steady supply of new graduates. In terms of the broad labour force, 59% of all Ontarians aged 25-64 or older have completed their post-secondary education. That's a higher percentage than in any of the 30 countries surveyed by the Paris-based Organisation for Economic Co-operation and Development (OECD), including the U.S., U.K., France, Germany or Japan.

Canada's R&D tax incentive program ranks among the most generous in the industrialized world. The program is designed to support your R&D activities in Ontario. Here's how:

• any size business can make a claim
• the range of eligible costs in Ontario is broader than in many countries
• there is no cap on the program.

• a 100% deduction of all eligible SR&ED costs, including capital equipment
• a 20% investment tax credit on SR&ED expenditures
• the investment tax credit can offset 100% of the federal tax payable in the year, or can be carried back 3 years or forward 20 years.

• increases to 35% from 20% up to the first $2 million of R&D each year
• is wholly or partly refundable in cash, even if the company does not have enough tax payable to use the credit.

• federal investment tax credits earned for SR&ED carried on in Ontario are exempt from Ontario income tax
• a 20% refundable Ontario Business-Research Institute Tax Credit for contract R&D performed at eligible research institutes in Ontario such as universities, colleges of applied arts and technology, and research hospitals.

For taxation years ending after 2008, corporations undertaking qualifying Scientific Research and Experimental Development in Ontario are eligible for a 4.5% non-refundable tax credit.

Federal and provincial Scientific Research and Experimental Development (SR&ED) incentives generate significant tax savings.

• The federal SR&ED tax credit can reduce your cost by 20%.
• Additional Ontario incentives can reduce your after-tax cost of $100 in R&D expenditures to less than $41.

During 2008 and 2009, for example, the real after-tax cost of a $100 R&D expenditure would range from $52.72 to as low as $35.28.

The following tables summarize R&D expenditures for large manufacturers, small and medium-sized manufacturers, large non-manufacturers, small and medium-sized non-manufacturers, and small Canadian-controlled corporations (CCPCs) in 2009.