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.
“This is a message to all the entrepreneurs, to startup businesses across the country. Canada will be the most competitive country, and we are making sure we empower you to do that.”
Finance minister François-Philippe Champagne
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.
The feds’ response? Promising one trillion dollars in new investments over the next five years; a $78.3-billion deficit for 2025-26; and major commitments across AI, quantum, venture capital programs, financial services innovation, and—perhaps most importantly—defence.
“Today, we’re delivering an investment budget,” Finance minister François-Philippe Champagne told the assembled press gallery at the budget lockup. “The kind of budget that will make Canada more resilient, more prosperous…that will make Canada the strongest economy in the G7.”
“This is a message to all the entrepreneurs, to startup businesses across the country. Canada will be the most competitive country, and we are making sure we empower you to do that.”
It’s unclear yet if that message will resonate with entrepreneurs. Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), said in a statement, “Small firms have learned the hard way that today’s deficits are tomorrow’s taxes.”
There are also outstanding political questions. In recent weeks, Liberal leaders have publicly worried about their ability to pass the budget 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.”
While an election might seem an unlikely result of Budget 2025, last year’s Fall Economic Statement and its resulting election should be a lesson to all Canadians that nothing is guaranteed.
But back to the budget proper. Here’s a look at what Canadian tech expected, what it got, and how it’s reacting.
Defence Tech
Financial Innovation
AI and Quantum
Tax Credits
Procurement and IP
Venture Capital
Executive Summary
Defence
- $17.9 billion over five years to expand military capabilities, including counter-drone operations
- $10.9 billion over five years to upgrade digital infrastructure at DND, CAF, and CSE, including cyber defence
- $1 billion over four years for an Arctic Infrastructure Fund investing in dual-use Northern transportation infrastructure projects
- $6.6 billion for the Defence Industrial Strategy, including:
- $1 billion to create a Defence and Security Business Mobilization Program at BDC for defence tech loans and investments
- $334.3 million to help “anchor” quantum companies in Canada and help with defence-related adoption
- $68.2 million over three years to establish the Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS)
- $656.9 million over five years for ISED to develop dual-use technologies across industries
- $182.6 million over three years to forge sovereign space launch capability
- $443.0 million over five years to Natural Resources Canada and ISED to support the development of innovative critical minerals processing technologies
- $30.8 million over four years ($7.7 million ongoing) to establish the Defence Investment Agency to consolidate, focus, and accelerate procurement for very large ($100 million or more) projects
Open Banking and Stablecoins
- Legislative commitment to improve open banking by:
- Completing the Consumer-Driven Banking Act
- Adding a data-mobility right to PIPEDA
- The Bank of Canada will now oversee open banking, taking over from the FCAC
- $25.7 million over five years ($5 million ongoing) for CSIS and the RCMP to support national security safeguards
- Reaffirmed support for Real-Time Rail launch in 2026
- Commitment to legislate open banking “write access” by mid-2027
- Legislative commitment to regulate the issuance of fiat-backed stablecoins
- Bank of Canada to retain $10 million over two years
- Commitment to a Retail Payment Activities Act amendment allowing PSPs to carry out payments for “prescribed stablecoins”
AI and Quantum
- $925.6 million over five years to back a large-scale sovereign public AI infrastructure (using $800 million from the Sovereign AI Compute Strategy)
- $25 million over six years ($4.5 million ongoing) for Statistics Canada to implement the Artificial Intelligence and Technology Measurement Program (TechStat)
- $334.3 for quantum tech through the Defence Industrial Strategy
- $223.1 million for quantum research
- $111.2 million to the Canadian Quantum Industry and to “unleash Quantum for Defence”
- NRCan to explore options for the Canadian Photonics Fabrication Centre to attract capital and scale operations
Venture Capital
- $1 billion over three years to launch the Venture and Growth Capital Catalyst Initiative with support for emerging fund managers and key sectors (e.g. life sciences)
- $750 million to address early-stage funding gaps
- Proposal to realign previous capital commitments to “current market needs”
Taxes and Tax Credits
- Budget 2024’s promised Lifetime Capital Gains Exemption limit to increase to $1.25 million
- “Productivity Super-Deduction” offering enhanced tax incentives on all new capital investments, including those eligible under SR&ED
- Marginal Effective Tax Rate (METR) drops by 2.4 percent
- Proceeding with previously proposed SR&ED updates
- SR&ED to implement elective pre-claim approval process and use AI to streamline administration
- Legislative promise to introduce Clean Electricity investment tax credit and enhanced investment tax credits
- Expanding Clean Technology tax credits to cover biomass energy/heat production and more critical minerals
- Income Tax Act changes will limit deferrals of refundable taxes on investment income through tiered corporate structures
Procurement and IP
- $105.9 million (starting 2026-27) to implement new Buy Canadian Policy
- $79.9 million to ISED over five years for new SMB Procurement Program
- $84.4 million over four years to ISED to extend Elevate IP program
- $22.5 million over three years to renew support for the Innovation Asset Collective’s Patent Collective
- $75 million over three years to the NRC to extend the IP Assist Program
- Feds to conduct IP performance review
Other Priorities
- An “accelerated pathway” for workers with US H-1B visas to immigrate
- Up to $1.7 billion to recruit and fund top researchers to Canadian universities
- Reduced regulations for telecom deployments, including a “dig once” policy for fiber optics
- Interchange Canada rebrand to the Build Canada Exchange while integrating 50 “external leaders” from tech and other sectors into the public service
- AI and automation used to cut costs across the government, including ISED and Finance Canada
- ISED won’t renew “certain funding envelopes” in Global Innovation Clusters and the Strategic Innovation Fund, including the Net Zero Accelerator
- ISED to transfer the Canadian Small Business Financing Program to BDC
The Breakdown
Defence Tech
Defence goes from an emergent sector to the cornerstone of federal tech commitments in Budget 2025.
Canadians won’t know the full details of the federal government’s Defence Industrial Strategy until weeks after Budget 2025, but they now know how much it will cost.
As the global order resets, Canada is taking a renewed interest in defence spending. Prime Minister Mark Carney made his intentions known in June when the Canadian government promised NATO it would spend five percent of its GDP on defence by 2035. Carney’s first budget has paved a path to that target, with billions in innovation commitments supporting direct investment, dual-use technology, improved procurement, and new agencies.
Read BetaKit’s full Budget 2025 defence tech story.
A “Competitive and Innovative” Financial System
After years of waiting, the federal government finally commits to catalyzing competition for financial innovators.
With Budget 2025, financial innovators may have finally got what they have long asked for. The federal budget includes major movement on long-awaited files in Canada’s financial services sector, including open banking and a framework for issuing stablecoins.
BetaKit was the first to report that FinTech leaders expected movement on open banking in the budget. What they got was significantly more: a commitment to introduce the remaining piece of legislation needed to make the financial data-sharing system a reality, with a target date for “write access” by 2027. The federal government is also signalling quick movement on stablecoin legislation, at least when it comes to issuing them.
“It’s a huge budget for FinTechs,” Fintechs Canada executive director Adriana Vega told BetaKit.
Read BetaKit’s full Budget 2025 financial innovation story.
AI and Quantum
The dollars: $1.26 billion
The ask: The Council of Canadian Innovators (CCI), which lobbies for tech scale-ups, called for Canada to build sovereign AI, cloud infrastructure, and hire Canadian firms to do it. The Canadian SHIELD Institute, CCI’s spin-off think tank, wanted “critical” intellectual property (IP) for AI technology to remain in Canada.
What the feds did: As demand for AI computing power grows, Carney pledged that the new Major Projects Office will help build a Sovereign Canadian Cloud with domestically controlled infrastructure and data centres. About $800 million of the $925.6 million promised in the budget over the next five years comes from the existing Sovereign AI Compute Strategy.
As expected, recommendations from Minister of AI and Digital Innovation Evan Solomon’s AI task force didn’t appear in the budget. The group’s 30-day mandate to provide recommendations only ended last week. The task force is consulting on updating the federal government’s AI strategy and will help Solomon table refreshed legislation on AI and digital privacy. Solomon will engage with industry “to identify new promising AI infrastructure projects and enter into Memoranda of Understanding with those projects.”
The government also characterized quantum computing as a key component of its AI strategy and devoted $334.3 million to the technology over five years, $223.1 million of which will go to research, while the remaining $111.2 million is slated for the industry and defence. The National Research Council (NRC) also plans to “explore options” that will make the Canadian Photonics Fabrication Centre more attractive to private capital and turn it into an innovation platform.
The reaction: While CCI President Benjamin Bergen called the sovereign cloud and compute commitments “a welcome investment,” he was quick to note gaps in the details. Bergen, who is also a member of Solomon’s AI task force, added: “Canada still lacks a clear definition of what constitutes a sovereign Canadian company. Without this foundational clarity, we risk deploying these investments in the same status quo way.”
Read more of the tech industry’s reaction to Budget 2025 here.
Taxes and Tax Credits: SR&ED, Cleantech, “Productivity Super-Deduction”
The ask: Several tech and business associations advocated 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, called for the reforms to be implemented, including expanding SR&ED to include public companies and reintroducing capital expenditures as claimable.
What the feds did: The proposed SR&ED reforms were adopted. This includes restoring the eligibility of capital expenditures and offering enhanced credit to some public corporations. It also means increasing the taxable capital phase-out thresholds for the program’s enhanced, 35-percent tax credit and raising the previously announced annual expenditure limit for enhanced credit from $4.5 million to $6 million.
Some of Shopify president Harley Finklestein’s hand-delivered requests also made the cut and will take effect April 1, 2026. An elective, pre-claim approval process grants technical approval before a project moves ahead, with the processing time cut in half to 90 days. There are also vows to streamline the review process, including the use of AI to speed up processing for “low risk” SR&ED claims.
A “Productivity Super-Deduction” will offer enhanced tax incentives on all new capital investment, including SR&ED. There will be immediate expensing (100-percent deductions in the first year) for clean energy systems, manufacturing equipment, and “productivity” items like patents and data infrastructure. The government claims the efforts will drop the Marginal Effective Tax Rate (METR) by 2.4 percent, making it the lowest in the G7.
The reaction: Bryan Watson, managing partner of CleanTech North and SR&ED commentator, welcomed the expected reforms and the administrative updates to speed up the program’s processing time. “If done right, this moment can unlock faster innovation, help crowd in private finance, promote stronger commercialization, and drive a globally competitive innovation economy built on Canadian ingenuity,” Watson told BetaKit.
Read more of the tech industry’s reaction to Budget 2025 here.
Procurement and IP
The dollars: $367.7 million
The ask: CCI called 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, Canada’s 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.
Separate from those reforms, CCI and Technation wanted SR&ED to include a patent-box regime that would give tax breaks to profits generated from domestic IP.
Meanwhile, a collection of non-profit tech support organizations that deliver the intellectual property support program Elevate IP asked Ottawa to renew the program’s funding with $90 million.
What the feds did: The government is making “Buy Canadian” its default policy, and will pledge a total of $105.9 million over five years (plus $9.8 million ongoing) to implement the approach through Public Services and Procurement and the Treasury Board Secretariat. ISED will receive $79.9 million over five years to support a new Small and Medium Business Procurement Program that gives these firms better access to federal projects.
Canadian patent protection is receiving multiple assists. ISED will get $84.4 million over four years to extend ElevateIP, and $22.5 million over three years for the Innovation Asset Collective’s Patent Collective. The NRC will get $75 million over three years to further the IP Assist Program.
The Budget also includes an IP “performance review” that will look for new ways to partner with IP-heavy companies, help them commercialize their work in Canada, and defend their ideas in foreign markets.
The reaction: Communitech CEO Sheldon McCormick, whose organization helps deliver ElevateIP, lauded the program’s renewed funding and said it would help address the growing demand from companies in the Waterloo Region.
Kaylie Tiessen, chief economist at the Canadian SHIELD Institute, wrote in a LinkedIn post that the success of the “Buy Canadian” policy will depend on how it’s rolled out. “Done poorly, we end up with foreign companies setting up in Canada to reap the rewards,” she said.
Read more of the tech industry’s reaction to Budget 2025 here.
Venture Capital
The dollars: $1.75 billion
The ask: The Canadian Venture Capital & Private Equity Association (CVCA) pushed 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 also sought 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 wanted 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) asked the feds to pass a promised increase to the Lifetime Capital Gains Exemption threshold.
NACO’s pre-budget submission 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 did: The government gave the BDC $1 billion to launch the Venture and Growth Capital Catalyst Initiative (VGCCI), a “fund-of-funds” meant to motivate institutional investors (such as pension funds) and provide support to both new fund managers as well as key sectors like life sciences.
The feds also pledged $750 million to support startups facing early-stage funding gaps. A consultation-driven strategy to support these startups is due in 2026.
As promised in Budget 2024, the Lifetime Capital Gains Exemption now covers up to $1.25 million of eligible gains.
The reaction: NACO CEO Claudio Rojas applauded the new $750 million in funding commitments, telling BetaKit, “This budget takes important steps toward aligning policy with the realities of early-stage entrepreneurs.” With a dissenting opinion posted to LinkedIn, Augur VC CEO Graeme Harrison was blunt: “the government should stop sticking its fingers into venture in Canada.”
Read more of the tech industry’s reaction to Budget 2025 here.
Feature image courtesy Madison McLauchlan for BetaKit.