Jim Balsillie, chair of the Council of Canadian Innovators (CCI) and former co-CEO of Research in Motion, has called it “the most important budget” of his lifetime.
Budget 2025 is a collection of firsts: Canada’s first fiscal update since a trade war broke out with the United States, and the first budget from a revamped Liberal party led by Prime Minister Mark Carney. As experts warn of faltering productivity, the stakes are high for this budget to protect Canada’s economic sovereignty while limiting its vulnerability to an unpredictable trade partner.
With the nation’s economic future in question, Canadian innovators have a role to play. Artificial intelligence (AI), quantum technology, and dual-purpose defence tech have all been named by the federal government as points of focus in its economic vision. Canadian tech wants to see commitments across those files, alongside the long-awaited delivery of previous budget promises.
With high economic stakes come political questions. In recent weeks, Liberal leaders have publicly worried about their ability to pass it with a minority government. In Montréal, AI minister Evan Solomon said he plans to table AI and privacy laws, but cautioned that “minority governments have their own climate.”
#Budget2025 drops today at 4 p.m. EDT. While we wait for the final tally, here’s a look at what Canadian tech expects (and hopes) will make the cut.
Artificial intelligence (and IP)
The ask: The Council of Canadian Innovators (CCI), which lobbies for tech scale-ups, is calling for Canada to build sovereign AI and cloud infrastructure and hire Canadian firms to do it. The Canadian SHIELD Institute, CCI’s spin-off think tank, wants “critical” intellectual property (IP) for AI technology to remain in Canada.
What the feds have said: As demand for AI computing power grows, Carney pledged that the new Major Projects Office will help build a Canadian sovereign cloud with domestically controlled infrastructure and data centres.
Minister of AI and Digital Innovation Evan Solomon has indicated plans to table refreshed legislation on AI and digital privacy. Solomon’s ministry has assembled an AI task force to consult on updating the federal government’s AI strategy. The group’s 30-day mandate to provide recommendations only ended last week, making it unlikely that related policies will appear in the budget.
Quantum computing (and IP)
The ask: Quantum Industry Canada, which represents several quantum tech firms, has asked the feds for a renewed national quantum strategy with a direct investment vehicle and policies to retain quantum IP in Canada.
Toronto’s Xanadu, which announced this week plans to go public, wants federal funding for its quantum data centre plans, as well as an expanded Canada Growth Fund scope that includes quantum. Canadian-founded D-Wave has asked the feds to expand some aspects of its $360-million national quantum strategy, including its commercialization and funding criteria. It also wants a “quantum sandbox,” or experimental environment, to encourage Canadian companies to test products with quantum tech.
What the feds have said: Minister Solomon has indicated that there will be targeted federal support for quantum innovation, but has not provided a timeline. The minister told BetaKit this summer that Ottawa plans to introduce new policies to help keep quantum firms in Canada.
According to The Globe and Mail, the federal budget is expected to include funds matching those of the US Defense Advanced Research Projects Agency (DARPA)’s quantum race program, which promises $300 million USD to companies that can build a usable fault-tolerant quantum computer. The previous Liberal government had promised a Canadian DARPA equivalent in 2021, which later became the Canada Innovation Corporation (which has yet to materialize).
Open banking, Real-Time Rail, and stablecoins
The ask: Canadian financial services innovators have been asking the feds to move forward with open banking for years. FinTech leaders BetaKit spoke to in October believe this year’s budget will finally contain the second piece of legislation needed to move the data-sharing system closer to reality. Industry group Fintechs Canada’s pre-budget submission also called for a competition mandate for financial regulators and a public ultimatum for banks to launch the long-delayed Real-Time Rail system (where transactions occur virtually instantly) by next year.
Crypto industry groups, including Stand with Crypto and the Canadian Blockchain Consortium, are urging the federal government to quickly create a regulatory framework for stablecoins. They suggest looking to the US GENIUS Act, which governs stablecoin issuers, as a potential model. CCI and the Canadian SHIELD Institute have also pressed for a stablecoin framework to ensure Canada doesn’t lag behind the US and the European Union.
What the feds have said: In addition to movement on open banking, FinTech leaders have been told to expect “language” around stablecoins in the budget. According to The Globe and Mail, draft legislation on the digital asset could cover rules around issuing and operating stablecoins, with safeguards for consumers.
Defence tech (and IP)
The ask: Prime Minister Carney promised in June to ramp defence spending up to five percent of Canada’s annual GDP by 2035. With that in mind, Canada’s defence tech sector wants a say in how that money is spent and what it’s used for.
CCI is calling for the government to establish the proposed Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS) for defence technology development. On the IP side, the Canadian SHIELD Institute has suggested creating a sovereign patent tool for dual-use (military and civilian) companies that contract with the government. It also wants Ottawa to expand the IP Collective, an initiative that mainly serves the cleantech sector, to defence.
Invest Ottawa asked the government to formally designate Ottawa as a National Defence Innovation Hub in its pre-budget submission, as the local tech hub looks to attract investment to the city’s defence startups. It’s also encouraging the government to invest in NATO’s 1-billion-Euro defence venture capital (VC) fund.
What the feds have said: The federal government has already announced $2.1 billion to strengthen its relationship with Canada’s defence sector and the development of a defence industrial strategy, as well as $560 million earmarked for National Defence and the Canadian Armed Forces’ digital foundations. This comes shortly after Carney launched a new Defence Investment Agency to help meet his ambitious defence spending target. The actual defence industrial strategy will be revealed a few weeks after the budget, according to Defence minister David McGuinty.
Prioritizing Canadian defence procurement is also part of the feds’ new “Buy Canadian” policy, which will require government suppliers to source key materials from Canadian companies in defence and construction procurements over a certain threshold.
IP and procurement (and SR&ED)
The ask: CCI is calling for an overhaul of the government procurement strategy that introduces participation targets for small and medium-sized businesses and encourages departments to co-develop solutions with the Canadian private sector. The organization recommended that the government pilot new authorities to award contracts.
In a pre-budget submission, the Canada Tech Network advised the government to create a specialized stream for startups to apply for government contracts, as well as incentives for larger companies to include startups in their procurement proposals.
Several tech and business associations are advocating for proposed reforms to the Scientific Research and Experimental Development (SR&ED) tax credit, some of which were previously announced in last year’s Fall Economic Statement. BDO Canada, which provides tax and business services, and TMX Group, which operates market exchanges, are advocating for the reforms to be implemented, including expanding SR&ED to include public companies and reintroducing capital expenditures as claimable.
Separate from those reforms, CCI and Technation are calling for SR&ED to include a patent-box regime, which would give tax breaks to profits generated from domestic IP. Shopify president Harley Finkelstein has argued that the feds should pre-approve SR&ED applications, reduce the refundable rate for large companies, and make commercialization costs claimable.
Meanwhile, a collection of non-profit tech support organizations that deliver the intellectual property support program ElevateIP are asking Ottawa to renew the program’s funding with $90 million.
What the feds have said: Carney has said that the “Buy Canadian” policy, once fully rolled out, will ensure the feds buy from Canadian suppliers across all federal funding avenues and Crown corporations.
The proposed SR&ED reforms are expected to be adopted, and the previous Liberal government said it would explore a patent-box regime in last year’s Fall Economic Statement, the details of which would be revealed in Budget 2025.
Noting that he hand-delivered his recommendations to Finance Minister François-Philippe Champagne last month, Finkelstein said he was seeing increased engagement from this government compared to years past.
VCCI and capital gains
The ask: The Canadian Venture Capital & Private Equity Association (CVCA) is pushing for a $1-billion renewal to the Venture Capital Catalyst Initiative (VCCI), first announced in last year’s Fall Economic Statement. It’s also calling for another $1-billion investment toward mid-cap-sized funds and an evergreen model for Venture Capital Incentivized Programs, where unused capital can be reinvested.
In a joint letter with CVCA, the National Angel Capital Organization (NACO) recommended that the feds launch a $450-million early-stage matching funds program complementary to VCCI. The angel investor network is also seeking a $200-million investment to establish a national infrastructure to activate private capital using existing organizations like angel networks and early-stage funds.
CVCA also wants capital gains reforms, with a 100 percent capital gains tax exemption on qualified startup equity for up to $15 million with a five-year holding period. The Canadian Federation of Independent Business (CFIB) has asked the feds to pass its promised increase to the Lifetime Capital Gains Exemption threshold.
NACO’s pre-budget submission also asked for the federal government to introduce a capital gains reinvestment deferral and a 30-percent, refundable National Investment Tax Credit for investments in Canadian-controlled VC funds or private placements.
What the feds have said: Shortly after taking office, Carney officially axed the controversial capital-gains tax change proposed by the Trudeau government in 2024, but said he would maintain the planned increase to the Lifetime Capital Gains Exemption and that legislation would follow “in due course.”
Talent and immigration
The ask: Following uproar about the years-long waitlist for the country’s Start-Up Visa program, Martin Basiri of Passage called for a “talent-first immigration strategy” in a memo for Build Canada. His proposal called for changes to the immigration points system to prioritize impact on GDP, people’s salaries, and where and what they studied. He also proposed cutting the number of federal employees and relying on AI to process applications.
What the feds have said: Carney has said that the budget will introduce an immigration plan that includes a talent attraction strategy, per Bloomberg. He said the strategy will contain skills training for scientists and innovators.
Feature image courtesy Creative Commons.