Prime Minister Mark Carney’s second federal budget will be tabled on Thursday at around 4 pm EST. His government’s first budget was largely well-received by the tech and business ecosystem, and today’s is expected to continue focusing on shoring up Canada’s economy so it’s more resilient to outside shocks.
One insider told BetaKit that “everything’s a priority, so nothing’s a priority” as innovation policy advocates anticipate Budget 2026.
Beyond the finance minister’s assertion that this budget will be “about entrepreneurs,” the government has signalled very little about new measures for the innovation sector. However, there are a handful of files the industry is expecting movement on. A proposed capital gains rollover is one, as is hundreds of millions of dollars in new funding for the space sector. The government will also likely provide an updated immigration plan.
Sean Mullin, a senior fellow at the University of Toronto’s Munk School of Global Affairs & Public Policy who recently served as a special advisor to the prime minister on economic affairs, said the recently dropped national security strategy, which put tech front and centre, could offer some clues. Along with frontier AI, it lists critical minerals, defence, energy, transportation, pharmaceuticals, biotech, food security, and financial systems as priority sectors Canada needs to build on. The recent Canada-EU Summit also set up several infrastructure projects, including an undersea data cable connecting Canada and Europe.
As one policy insider told BetaKit, “everything’s a priority, so nothing’s a priority.” It remains to be seen which sectors will see their wishes reflected, and which matters of national interest get the biggest financial boost.
Taxes
The ask: Business and tech groups want tax changes that will make Canada a more competitive place to invest.
The Council of Canadian Innovators, the Canadian Venture Capital & Private Equity Association (CVCA), the National Angel Capital Organization (NACO), and other investor groups launched a campaign asking the feds to create a tax incentive similar to the US Qualified Small Business Stock regime, and to create a capital gains tax deferral when proceeds are reinvested in another Canadian company. Build Canada went a step further, suggesting a corporate tax change that only taxed profits, not reinvested earnings.
The Canadian Federation of Independent Business (CFIB) is asking the feds to cut the small-business rate from nine to six percent and to extend the preferred tax rate for small businesses to a company’s first $700,000 of income, rather than $500,000.
What the feds have said: On Monday, Finance Minister François-Philippe Champagne asserted this budget would be “about entrepreneurs,” and teased that small business tax troubles would be a target.
On the investor side, CVCA CEO Benjamin Bergen said he was “cautiously optimistic” about progress on his organization’s proposed tax initiative, while NACO CEO Claudio Rojas told BetaKit that the government is showing promising signals about wanting to take action.
Aerospace and defence
The ask: Canadian defence tech firms want clearer and faster-moving procurement rules. Aspiring neoprime Dominion Dynamics asked the feds to lower the threshold for contracts awarded through the Defence Investment Agency to $25 million, and to create “agile procurement models” for software and other advanced defence tech. The Canadian Strategic Mission Corporation, while advocating for funding toward its own nuclear micro-reactors, asked for increased investment in dual-use technologies.
Similar procurement asks came from the spacetech sector. Satellite company Kepler Communications wants the government to apply the defence Build-Partner-Buy framework to the space sector, and more clarity on how to be selected as a strategic partner. A coalition of space companies, including Maritime Launch Services and Reaction Dynamics, was bolder, calling for a new national space industrial strategy and for the feds to commit to being the first customers for domestic space companies.
What the feds have said: Multiple sources told BetaKit they expect more movement on the spacetech front than net-new commitments for defence. In particular, sources are anticipating hundreds of millions toward space launch efforts.
The federal government has committed more than $200 million through defence envelopes to companies building sovereign launch capacity—something Canada still does not have. The Department of Defence signed a $20-million deal with NordSpace to access its Newfoundland spaceport over the next 10 years.
Artificial intelligence
The ask: The tech sector wants AI infrastructure built in Canada. CCI recommended that the feds build a “sovereign industrial base” of Canadian firms by providing domestic compute capacity, better access to high-quality data, and procurement rules that prioritize buying Canadian. Similarly, the Canadian Shield Institute called for a “strategic sovereign compute entity” that Canadian companies can tap for computing power.
Meanwhile, other groups are focused on adoption. Accountant group CPA Canada asked for more responsible AI adoption and stronger governance, while CPA Canada suggested an AI and digital investment tax credit to encourage small businesses to integrate the technology.
What the feds have said: Many of these asks (more domestic AI infrastructure, adoption, responsible governance) were alluded to in the federal AI strategy released in June, so it’s unclear how much more Canadians should expect on the AI front from the budget.
The feds are also already spending on computing power and infrastructure. The government released its $2.4-billion Sovereign AI Compute Strategy in 2024; under Prime Minister Mark Carney, the government has topped up the strategy and deployed millions through the AI Compute Access Fund. A condition of Cohere’s $1.6-billion investment from the feds was that the company invest at least $1.7 billion in new computing infrastructure (meaning data centres) in Canada by 2030.
Quantum computing and deep tech
The ask: Canada’s quantum computing industry wants more funding to support building a full-scale quantum computer. Industry group Quantum Industry Canada wants more funding for its operations, as well as a renewed national quantum strategy. Member company Photonic, which is part of the federal Canadian Quantum Champions Program (CQCP), wants the feds to continue supporting the program. Meanwhile, Zero Point Cryogenics argues that Canada’s entire quantum supply chain—including itself, which makes cryogenic freezer tech—should be included in this program.
Other deep tech sectors argue that their sectors need more federal attention. Canada’s Semiconductor Council wants a national semiconductor and photonics strategy, including funding commitments. Nuclear fusion company General Fusion wants (unsurprisingly) a national fusion energy strategy.
What the feds have said: The government already committed more than $330 million to the quantum industry in last year’s budget. Beyond deploying funds through the CQCP, it hasn’t signalled that much else is in the works.
AI and digital innovation minister Evan Solomon said in May that Canada wouldn’t pursue a national semiconductor strategy, and that some elements would be covered in the since-released AI strategy. However, the feds also announced that Ottawa’s federal semiconductor facility would be opened up for private investment, and no announcements have been made yet.
FinTech
The ask: The FinTech sector wants long-awaited measures that would boost competition in the financial sector to finally come into effect.
Industry group Fintechs Canada, FinTech company Neo Financial, and EQ Bank asked for the feds to follow through on (and, in some cases, speed up delivery of) an open banking system. Fintechs Canada and EQ Bank also asked for an accelerated rollout of Real-Time Rail (RTR); Payments Canada, the organization responsible for delivering it, wants the government’s continued support for the launch.
Wealthsimple wants the feds to implement a ban on investment and registered account transfer fees that was announced last year. On crypto, the Canadian Web3 Council and Shakepay recommended the government loosen its language around a ban on stablecoin interest and yields.
What the feds have said: Last year’s budget saw the feds commit to a “competitive and innovative” financial system and to push open banking, RTR, and stablecoins forward. All that is left is finalized regulations on open banking and stablecoins, as well as specific RTR go-live dates.
On stablecoin yields, the government’s draft regulations for stablecoins have actually carved out somewhat of an exception for stablecoin yields when rewards are paid out based on transaction activity.
Wealthsimple got some movement toward its goal when the feds took the first steps to ban account transfer fees at federally regulated banks on Wednesday, CEO Michael Katchen said.
Immigration and talent
The ask: The business sector wants an immigration plan that brings in skilled workers, as well as measures to upskill existing talent for new advances in tech.
Following the Liberals’ immigration clampdown, CFIB and other business groups want to give provinces more control over immigration levels, as they say some sectors are struggling to find enough skilled talent. The Canadian Chamber of Commerce suggested not a net increase or decrease, but an approach tailored to different regions.
Tech has some specific asks to grow the number of startup founders in Canada. CCI wants a more competitive Start-Up Visa Program (which was put on pause last December) that offers temporary residency first with a pathway to permanence tied to business performance. CVCA supports that ask, particularly through an Entrepreneur Pilot that prioritizes high-growth venture sectors.
What the feds have said: The feds are expected to release an immigration plan for the next three years in the budget. What’s unclear, according to Bloomberg, is whether this plan will show a marked increase in numbers or keep things the way they are.
Feature image courtesy François-Philippe Champagne via LinkedIn.