Build Canada, the tech-and-business-backed policy platform founded by entrepreneurs, recently caused a stir on X with a pair of infographics on Canada’s entrepreneurial exodus (see here and here). Their CEO, Lucy Hargreaves, called it “a five-alarm fire” for policymakers. She’s right, and it lands at a timely moment.
Finance Minister François-Philippe Champagne is asking Canadians for ideas to improve the tax system ahead of the fall federal budget. His office reached out for recommendations, and it was clear from that conversation that the Carney government sees this exodus as a pressing problem.
Champagne says he doesn’t want to study the issue and considers himself “a man of action.” The bias for action is the right instinct. We need to move quickly on making Canada’s tax system much more competitive.
Canada has endured more than a decade of weak productivity growth, compounded by tariffs, geopolitical volatility, and sluggish business investment. Both capital and talent are voting with their feet.
What follows are tax changes that could move the needle. This isn’t an exhaustive list, and it comes with a caveat upfront: in a country running sizable deficits, these changes must be paid for. Ottawa can fund them by clearing out boutique carve-outs and tax preferences or by restraining ineffective spending. Fiscal discipline shapes the design of tax reform, but it can’t be an excuse for inaction. There’s too much at stake.
Capital gains taxes
Let’s start with capital gains, the area most directly tied to the entrepreneurial brain drain. In 2016, roughly three-quarters of Canadian founders who raised more than $1 million were based in Canada. By 2024, only about a third remained and nearly half had moved to the U.S. Other data reinforces this trend (see here, here, and here).
We can’t change the reality that the U.S. is a much more dynamic economy that attracts ambitious entrepreneurs. The American market is deeper, its venture capital ecosystem is more mature, and its network effects are unparalleled. Ottawa can’t legislate its way past San Francisco. It can, however, stop making the decision to build here harder than it needs to be.
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The Carney government is alarmed by Canada’s entrepreneurial exodus. Key proposals to enhance competitiveness include overhauling capital gains taxes, personal income taxes, and corporate taxes to attract and retain entrepreneurs. Canada needs comprehensive tax reform rather than piecemeal measures, as well as the importance of addressing broader economic policies. With a focus on fiscal discipline, the government must act decisively to reverse the trend of capital and talent leaving Canada.