Mini-budget with many tech commitments comes during a day of chaos on the Hill.
The Government of Canada barely tabled its Fall Economic Statement (FES) after a day of political chaos and uncertainty.
The Liberal government was thrown into turmoil following the surprise resignation of Deputy Prime Minister and Finance Minister Chrystia Freeland hours before she was scheduled to deliver the feds’ latest economic plan.
The FES was tabled without a speech and with no questions permitted from the House of Commons, despite outcry from MPs.
With no finance minister at the time, House Leader Karina Gould tabled the FES just after 4 p.m. this afternoon, which includes a number of measures aimed at spurring more investment in Canada’s technology sector and domestic businesses more broadly. Facing a glaring hole at one of the most important cabinet positions, the FES was tabled without a speech and with no questions permitted in the House of Commons, despite outcry from Members of Parliament (MPs).
Shortly thereafter, Dominic LeBlanc was sworn in as the next Minister of Finance, filling one leadership gap in the Liberal government while questions remain at the top. Following Freeland’s resignation and the delayed release of the FES, members of the Conservatives, NDP, Bloc Québécois, and multiple Liberal MPs alike called on Prime Minister Justin Trudeau to step down. Trudeau has yet to respond publicly to these calls or address Freeland’s departure and LeBlanc’s appointment, but is also reportedly considering prorogation or resignation.
Freeland resigned from cabinet earlier today, claiming that Trudeau told her last week that he no longer wanted her to serve as finance minister. In a letter announcing her resignation, Freeland noted that she has been at odds with Trudeau lately regarding the best path forward for Canada at a time when the country faces “a grave challenge” from the United States (US), whose incoming administration is pursuing aggressive economic nationalism, and has threatened 25 percent tariffs.
“We need to take that threat extremely seriously,” Freeland wrote. “That means keeping our fiscal powder dry today, so we have the reserves we may need for a coming tariff war. That means eschewing costly political gimmicks, which we can ill afford and which make Canadians doubt that we recognize the gravity of the moment.”
Her departure comes days after she pre-announced a slew of new federal programs and updates for Canada’s tech sector contained in the FES.
These include a renewal of the Venture Capital Catalyst Initiative (VCCI) and Scientific Research and Experimental Development (SR&ED) tax credit reform, alongside new programs designed to encourage more private investment in mid-cap growth companies and artificial intelligence (AI) data centres, among other measures.
Today, the federal government outlined plans to renew VCCI for a fourth time and inject up to $1 billion. Under the investment-matching program, the government provides one dollar for every three dollars raised by select indirect fund managers up to a cap. The latest $1-billion VCCI round will include “more enticing terms” for those funds, but no other details were provided.
The feds are also investing up to $1 billion in mid-cap growth companies to crowd in additional private capital to the growth equity market. The funding will be delivered by a qualified fund manager and concessional, meaning that it provides favourable, low-interest terms for companies.
RELATED: Liberals’ Fall Economic Statement contains more promises to Canadian tech
According to the FES, the government is developing a program that would provide up to $15 billion in aggregate loan and equity investments for AI data centre projects that receive investments from Canadian pension funds. Those funds must invest at a two-to-one ratio compared to the government, and must become “significant shareholders” in a data centre project. The feds say seven pension funds have already expressed interest and more details will be announced in Budget 2025.
To attract more investment, the feds are removing the cap that currently restricts pension funds from owning more than 30 percent of a Canadian company, making it easier for them to acquire controlling stakes.
The Government of Canada has also committed $150 million over three years starting in 2024–2025 for the Global Innovation Clusters and $24 million over two years beginning in 2025–2026 for the national AI institutes. This comes in addition to its recently announced $2-billion Canadian Sovereign AI Compute Strategy.
The government is proceeding with long-awaited reforms of the Scientific Research and Experimental Development (SR&ED) program. As of any fiscal year beginning on or after Dec. 16, businesses can now claim capital expenditures on SR&ED tax credits again, reversing a Harper government-era change. Public companies, which previously were entitled to a 15-percent non-refundable tax credit, will be permitted to claim the 35-percent tax incentives for applicable research and development projects.
The feds are also raising the annual expenditure limit under SR&ED from $3 million to $4.5 million, allowing companies to claim a maximum of $1.575 million per year. The reforms also raise two key eligibility criteria: Companies can access the credit with taxable capital under $15 million, up from $10 million. The phase-out threshold for taxable capital has been raised to $75 million from $50 million.
RELATED: Feds announce VCCI renewal, SR&ED and pension fund changes ahead of FES
Another new detail from today’s announcement is the federal government’s plan to implement a patent box regime to encourage the development and retention of intellectual property in Canada. The feds said they are currently reviewing feedback from recent consultations and will share details of this regime in Budget 2025.
The Government of Canada also indicated that the launch of its consumer-driven banking framework will not happen until early 2026—not 2025 as promised in last year’s FES—marking yet another delay in Canada’s lengthy quest to implement open banking.
The feds also plan to amend the Income Tax Act to expand what qualifies as an eligible small business corporation share and relax certain conditions for the rule to apply to allow investors to defer the taxation of capital gains on investments. This includes allowing preferred shares to qualify, increasing the asset limit of eligible small business corporations that qualify for investment to $100 million, and to increase the length of the period to acquire new investments to within the year of disposition and one full calendar year following it.
It remains unclear what impact Freeland’s departure has on the plans laid out in the FES. At time of publication, Trudeau and the Liberal caucus (including Minister Freeland) were still in an emergency meeting to discuss the day’s events. The CBC has also reported that as many as 60 Liberal MPs will sign a letter asking Trudeau to resign, echoing repeated requests made across the aisle today.
Canadian business leaders have expressed fear that Freeland’s departure will further erode investment in the country and destabilize its already shaky economy at a time when US President-elect Donald Trump has threatened tariffs. Private calls for an election mirrored public requests from the Conservatives today for a confidence vote, underscored by uncertainty in the continued stability of the federal government.
“Last week, we were encouraged by an announcement from Minister Freeland, which improved the program criteria for the SR&ED tax credit and increased funding for Canada’s venture capital ecosystem,” Council of Canadian Innovators president Ben Bergen said in a statement today. “Today, Chrystia Freeland is gone, and the future of the Liberal government is up in the air.”
“Canadian innovators cannot scale globally on shaky ground—we need strong leadership, not uncertainty, at this critical moment.”
With files from Douglas Soltys and Alex Riehl.
Feature image courtesy Flickr.
