What the tech sector wants from the federal election as Canada faces ‘perfect storm’ for foreign takeovers

Despite Canada’s strong contribution to deep-tech fields like AI and quantum computing, hometown firms have had little control over their intellectual property. Photo by Getty Images

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Canada’s innovation and productivity woes are no secret. A report by The Conference Board of Canada found the country placed 15th out of 20 advanced economies when it comes to innovation performance in 2024, while a report the same year from a TD Economics report noted business sector productivity has failed to grow at all since 2019. Both the Liberal and Conservative parties have promised a combination of smarter investment and tax policy and more efficient government as ways of helping the country improve its economic performance, but what does the technology sector itself want? Here’s what they say is needed to establish Canada as a force in the digital age.

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The belief that Canada’s tax system needs to be more competitive, overall, to spur investment in innovation is widely held in the tech sector.

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After the Liberals proposed a capital gains tax hike in 2022, Canada’s tech industry vocally campaigned Ottawa to scrap the idea. High tax rates and complex regulations “deter investment, drive businesses to relocate, and stifle innovation,” said the Canadian Venture Capital Association (CVCA), a private capital sector lobby group that represents over 350 firms. In one of his early moves after taking over as prime minister, Mark Carney cancelled the unpopular increase ahead of the federal election.

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The CVCA is proposing further measures. It recommends that Ottawa temporarily reduce the capital gains tax inclusion rate from 50 per cent to 25 per cent for investments into eligible Canadian businesses for a period of three to five years to stimulate “productive private investment,” it said in an April 2025 white paper.

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Certain programs, such as Canada’s Scientific Research and Experimental Development (SR&ED) tax credit, designed to incentivize businesses to conduct R&D in Canada, should be modernized “to reward innovation and commercialization of Canadian ideas” and support Canadian companies, the Canadian Council of Innovators (CCI), a tech lobby group that represents 150 Canadian companies. The CVCA suggest this could be achieved by raising annual expenditure limits and taxable capital thresholds.

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Government and regulatory reform

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Some tech executives and advocacy groups have endorsed shedding underperforming government programs and streamlining agencies.

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In February, a coalition of tech founders and leaders launched Build Canada — a platform for publishing policy proposals. In one memo, Daniel Eberhard, the founder and CEO of fintech Koho Financial Inc., advocated for a leaner and more effective federal civil service that would slash 110,000 public sector jobs and mandate and publish “department performance metrics and targets for all federal civil services.” A number of business leaders supported the idea, including Shopify Inc.’s head of engineering, Farhan Thawar; WIND Mobile co-founder Brice Scheschuk; and CIBC’s head of innovation banking, Mark McQueen.

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The government also needs to adopt better regulatory tools, such as expanding regulatory sandboxes to fast-track new technologies in Canada, and merging and modernizing federal standards bodies to make regulatory processes more palatable to innovators, said CCI.

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The Buy Canadian movement — motivated by U.S. President Donald Trump’s tariff assault — should apply to government procurement, too, tech groups say. Ottawa could “legislate procurement targets so that government agencies spend a prescribed amount on innovative, Canadian tech — similar to the U.S.’s Small Business Administration (SBA) and Small Business Innovation Research Program (SBIR),”  said Matthew Klassen, the vice-president of external relations at Communitech, a Waterloo-based tech cluster that helps startups scale. According to CCI, Ottawa’s current approach is too slow, too risk-averse and favours big multinationals over domestic innovators. “Modernizing how the Canadian government buys technology could be a game-changer to drive economic growth,” it said.