Tech highlights from the 2021 federal budget

By Kathleen Reid

April 20, 2021

The new federal budget appears to have been worth the 25-month wait for Canada’s tech sector. The $101.4 billion in new spending (over three years) includes the most significant outlay of innovation-related dollars since 2017, when the Liberals launched many of their flagship R&D, commercialization and venture capital programs. Here are the 2021 highlights: 

SIF souped up

The Strategic Innovation Fund (SIF), which provides grants and loans of over $10 million for business R&D, commercialization and facility expansions, is being topped up with $7.2 billion in new capital over seven years. 

IRAP ramped up

Commonly tapped by startups to fund tech development, the National Research Council’s Industrial Research Assistance Program (IRAP) is being allocated $500 million over five years, with an additional $75 million over three years to offer client firms “expert intellectual property services.” Likewise, a further $90 million has been allotted to incubators and accelerators that give enrolled startups access to advice, and $60 million over two years to the Innovation Supercluster Initiative

B.C. beefed up

Making good on a pledge in its fall economic statement, Ottawa is spending $553.1 million over five years, and $110.6 million ongoing, on a new Regional Development Agency (RDA) in British Columbia.

Green rush

The feds’ $17.6 billion in “green recovery” spending includes an additional $5 billion over seven years for the Net Zero Accelerator, a program designed to help large emitters decarbonize and cleantech firms scale up. It also includes up to $1 billion over five years to help attract private-sector investment to cleantech projects. There are also a number of tax breaks and incentives for cleantech and the green economy, including a proposal to reduce general corporate and small-business income tax rates by 50 per cent for firms that manufacture zero-emission technologies, and an investment tax credit for capital invested in projects for carbon capture, utilization and storage. 

Targeting talent

The new Sectoral Workforce Solutions program offered through Employment and Social Development Canada is being allocated $960 million over three years to support the employee-training needs for small- and medium-sized businesses. The government also plans to spend $708 million over five years for Mitacs — a non-profit that works with academia and industry on talent training and recruitment — to deliver on-the-job learning opportunities. 

The CanCode program, which helps young people learn digital skills including coding, is getting $80 million over three years to help it reach three million more students, with an emphasis on underrepresented groups. 

The Express Entry program for highly skilled immigrants is also being streamlined, with the immigration minister having the authority to help select Express Entry candidates to become permanent residents. The government is spending $428.9 million in new funding over five years to overhaul the digital platform that supports Canada’s immigration system.

AI and quantum leaps 

The Pan-Canadian Artificial Intelligence Strategy is being renewed with $443.8 million in new capital over a decade, including $185 million over five years to commercialize research and inventions, as well as money for universities to hire academics and buy equipment. It also allocates $360 million over seven years for a new National Quantum Strategy, and $400 million over six years for a genomics plan. And there’s $2.2 billion over seven years for life-sciences programming, including $500 million via the Canada Foundation for Innovation to pay for new equipment and infrastructure at universities, $250 million for the federal granting councils that fund research projects, and $45 million for stem-cell exploration.

SME support 

Companies investing in transitioning to “a more productive, knowledge-intensive economy” could take advantage of an estimated $2.2 billion over five years in rebates designed to incentivize “assets that drive growth” like digitization and intellectual property. Under the program, Canadian-controlled private businesses could expense up to $1.5 million, or over 60 per cent, of capital investments made between now and before 2024. The budget also proposes $2.6 billion over four years to the Business Development Bank of Canada to help small- and medium-sized businesses finance technology adoption. And it recommends changes to the Canada Small Business Financing Act, which would increase costs by an estimated $560 million a year. Amendments include expanding loan-class eligibility to let companies lend against intellectual property and startup assets and expenses. It would also increase the maximum loan amount from $350,000 to $500,000, and extend the loan-coverage period from 10 to 15 years for equipment and leasehold improvements.

VC for victory

The Venture Capital Catalyst Initiative (VCCI), which seeds funds-of-funds and VC funds that raise further private-sector money, is receiving a $450-million top-up over five years, with $50 million allocated to life science-focused fund managers and $50 million to “increase access to venture capital for underrepresented groups, such as women and racialized communities.” 

Digital developments

Under a digital-services tax (DST) that would take effect on Jan. 1, 2022, companies with more than $1.13 billion in global gross annual revenue would have to pay 3 per cent on domestic sales of more than $20 million of “digital services that rely on data and content contributions from Canadian users.” The DST would remain in place until ongoing negotiations on multinational taxation are resolved. 

Ottawa will appoint its first data commissioner to issue guidance on “protecting people’s personal data and to encourage innovation in the digital marketplace.” In December 2019, the Liberal government signalled the regulator would focus on large tech firms.  

The Universal Broadband Fund, designed to bring better Internet service to remote and rural communities, is getting an extra $1 billion over six years.


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