TORONTO — Canada must transform its approach to supporting and procuring artificial intelligence (AI) technologies if it intends to maintain a competitive edge in the global AI landscape. An advisory group, the AI Strategy Task Force, urged the federal government to prioritize backing for the most promising AI firms and applications in a series of memos submitted late last year.
AI Minister Evan Solomon formed the 28-member task force, comprised of founders, investors, and researchers, in late September, tasking them with providing proposals ahead of the upcoming renewal of Canada’s national AI strategy. Recommendations included launching new funding initiatives, revising tax codes, and updating procurement processes to favor local AI developers.
According to the task force, Canada has struggled to convert its strengths in AI research into commercially viable products and globally competitive companies. Many members expressed concerns that existing federal support mechanisms are inadequate for assisting firms in their growth trajectories—a longstanding issue among Canadian policymakers and tech executives.
In submissions, Michael Serbinis, CEO of League, proposed a comprehensive financing strategy totaling $9 billion. This plan involves a $2 billion fund-of-funds aimed at seeding venture capital for early-stage startups, alongside a $2 billion AI growth fund to support Series A and B financing. Serbinis also suggested establishing a $5 billion sovereign wealth fund to invest between $50 million and $500 million in growth-stage ventures, asserting that these initiatives could significantly increase the number of startups receiving funding and foster the emergence of larger companies over the next decade.
Similarly, Patrick Pichette of Inovia Capital advocated for heightened investments from institutional investors, recommending that Canada’s eight largest pension funds allocate one percent of their assets over the next five years into a new deep tech venture capital fund. He further proposed that these funds should eventually dedicate five percent of their capital to support national technology priorities.
Task force members also called for adjustments to existing programs like the Industrial Research Assistance Program and the Scientific Research and Experimental Development (SR&ED) tax incentive. They highlighted a need to simplify application processes and broaden eligibility for AI innovation expenditures. For instance, while companies can claim SR&ED credits for purchasing chips to train AI models, they currently cannot write off costs associated with tailoring those models for specific applications.
Concerns regarding a potential brain drain have led some task force members to advocate for reforms in capital gains taxes. Options ranged from eliminating the tax for founders and employees in small startups to increasing the exemption to $25 million per business. “Canadian talent is leaving because their economic upside is greater elsewhere,” stated Daniel Debow, chair of Build Canada.
Others emphasized the need for Ottawa to bolster local AI adoption through targeted tax incentives for businesses integrating AI into their core operations. Former Canadian Tire executive Cari Covent suggested that firms in key industries should receive tax relief on capital costs associated with AI implementation.
Some task force members argued for a more aggressive strategy focused on procurement, urging the federal government to become a key customer for Canadian AI startups rather than simply offering grants. Sonia Sennik, CEO of Creative Destruction Lab, emphasized that Ottawa could transform into a strategic first customer for potential high-value firms.
Moreover, there were calls for identifying select firms as “Canadian global champions,” which would unlock government investment and contracts. Serbinis proposed establishing criteria to designate these companies, with access to advantageous capital gains tax breaks and closer ties to senior officials.
Professor Ajay Agrawal from the University of Toronto recommended focusing on five “moonshot” projects aimed at significantly improving critical social issues through AI, such as drastically reducing patient wait times for treatment. “Markets alone will under-invest in experimentation,” he stated, highlighting the need for government backing.
The task force has suggested that the renewed AI strategy concentrate on sectors where Canada has competitive advantages, including agriculture, cybersecurity, and healthcare. They proposed tactics such as adoption playbooks and public datasets for companies to leverage in training their AI models.
As the Liberal government prepares to unveil its updated AI strategy this quarter, Solomon has asserted that it will be “unapologetic about championing our champions.” The forthcoming measures will address pressing issues related to AI adoption, commercialization, and public trust in the technology.
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