Artificial Intelligence and Digital Innovation Minister Evan Solomon in Montreal in September. He has promised a new AI strategy in 2025.Christopher Katsarov/The Canadian Press
The federal government outlined plans Tuesday to expand the use of artificial intelligence across its vast operations, signalling in the budget it would create “a generational opportunity for domestic innovators” by tasking them to build and deliver those tools.
The move was among a series of measures affecting the technology sector, including improvements to Canada’s biggest innovation-spending program, funding for quantum technologies, legislation to support open banking and stablecoins, and a plan to poach foreign researchers.
The Mark Carney government has been keenly aware that Canada risks missing out on the economic benefits of AI and that our public and private sectors are falling behind international peers when it comes to implementing and commercializing the technology. That’s despite the fact that Canada introduced one of the first AI national strategies in 2017 and many leading researchers were educated here.
In May, he appointed Evan Solomon as the first minister for AI, who has promised a new AI strategy in 2025. Ottawa has since signed a non-binding deal with Toronto AI company Cohere Inc. to look for ways to deploy the technology across the public sector.
The budget tasks Mr. Solomon with identifying and negotiating “new promising AI infrastructure projects” with industry, while the government plans to enable the Canada Infrastructure Bank to invest in such projects.
The budget highlights a $925.6-million commitment over five years to build large-scale sovereign compute capacity – Canadian-owned and operated data centres for cloud computing and AI – though $800-million of that was earmarked in the 2024 budget.
“It’s good to see the government treating AI as national infrastructure,” said Lawrence Zhang, head of policy at the Centre for Canadian Innovation and Competitiveness.
But Canada needs to follow countries, including the United States and South Korea, that pair data centre infrastructure with AI deployments in places such as hospitals and factories, he said. “Without that, Canada risks building the pipes without the flow.”
The government also said Tuesday that it would create an office of digital transformation to “proactively identify, implement and scale technology solutions” internally, making good on a campaign promise. Several departments have been mandated to deploy AI to streamline and automate operations, including Justice, Transport, and Public Services and Procurement. The Shared Services department will work with the Department of National Defence and the Communications Security Establishment to develop a “made-in-Canada AI tool” that can be deployed across government. Shared Services will partner “with leading Canadian AI companies to develop this internal tool,” the budget said, to “create opportunities” for domestic tech companies.
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Innovators have long called for changes to the cumbersome Scientific Research and Experimental Development (SR&ED) tax incentive program, which costs $4.2-billion a year. The budget commits to streamline the “burdensome, administrative process” for innovators to access SR&ED. That includes implementing a preclaim approval process, which would cut processing time in half, to 90 days. The government said the Canada Revenue Agency would use AI to speed up administration of SR&ED and cut needless steps. Those changes will be implemented by April.
The government also sweetened SR&ED’s benefits, allowing Canadian-controlled private corporations and public companies to earn a 35-per-cent tax credit on the first $6-million of qualifying annual expenditures. That’s up from $4.5-million announced last fall, which was an increase from $3-million. That will cost Ottawa $293-million over five years.
The government committed $1.7-billion to attract leading brains to Canada. That includes $1-billion over 13 years for federal funding agencies to recruit 1,000 “exceptional international researchers” to fill university research chairs. (Canada’s early AI lead was owing to similar efforts years ago to bring pioneers like Geoffrey Hinton here.) The budget also commits $400-milion to establish infrastructure that supports their work. Industry proponents have called for months for Ottawa to take advantage of disarray in the academic community in the U.S. – where the Trump administration has held up funds for some medical research and gotten into fights with universities – to bring talent north.
The government promised to advance open banking with legislation that would make it easier for digital challengers to compete against big banks. It confirmed recent reports by pledging to introduce a federal framework to regulate the issuance of stablecoins – cryptocurrencies pegged to fiat currencies or commodities. And it pledged to explore attracting private capital to invest in the National Research Council of Canada’s photonics fabrication centre, a semiconductor maker.
The budget commits $182-million to strengthen intellectual property protection, and extends a program introduced in 2012 to stimulate venture capital investment in Canada, with a focus on incentivizing pension funds and other institutional investors to invest. The government committed to develop a strategy to provide $750-million to fill funding gaps faced by Canadian tech companies.
“This budget is encouraging because it understands the complexity of the moment and lays out some forward policies to address where we’re at,” said Benjamin Bergen, president of the Council of Canadian Innovators. But he added, “We’ll definitely need to see a deeper colouring-in” of the measures to see how they can create economic prosperity and security for Canadians.
At least one budget measure fell short of what proponents had called for. With interest in quantum technologies surging, the government committed $334.3-million to the sector for an unspecified “suite of measures” to anchor Canadian companies here and support adoption for defence-related applications.
That’s well short of the $1-billion that the federally appointed National Quantum Strategy Advisory Council had called on the government to commit, including matching funds for Canadian companies that participate in a high-profile competition by the U.S. Defense Advanced Research Projects Agency (DARPA).
Three Canadian companies qualified for the first stage of the DARPA program, which challenges developers to show they can build a commercial-grade quantum computer by 2033. Those that make it into the next stage will get US$15-million, and finalists could receive US$300-million more.
Quantum leaders worry that unless Canada matches those amounts, ambitious U.S. states such as Illinois or Maryland could entice Canadian competitors to shift operations there. But if even just one of the Canadian companies makes it to the end, the proposed Canadian budget funding wouldn’t cover that.