On April 16 Deputy Prime Minister and Minister of Finance, Chrystia Freeland, released the 2024 Federal Budget which sees nearly $53B in new spending over 5 years.

The big question going into the Budget was how the promised spending, much of which had been trailed in a series of pre-announcements, would be paid for.

The answer? Raising taxes on capital gains with 67% of an individual’s capital gains above $250,000 subject to taxation, compared to 50% previously. (The 50% inclusion rate is preserved for individual gains up to $250,000.) The new 67% inclusion rate will apply to all of a corporation’s capital gains.

The tax rise does offset the inflationary pressure of the new federal government spending, preserving hopes that the Bank of Canada will be able to cut interest rates soon.

Key spending commitments for the innovation economy were focused on AI including:

• $2 billion over five years to introduce a new AI Compute Access Fund and develop a new Canadian AI Sovereign Compute Strategy to provide short-term subsidy support and long-term compute infrastructure for Canadian AI researchers, start-ups and scale-ups. Program design will be led by Innovation, Science and Economic Development Canada (ISED)
• $200 million over five years to support AI start-up productization, commercialization, and adoption of AI applications across critical sectors such as agriculture, healthcare and manufacturing through targeted programing of the Regional Development Agencies
• $100 million over five years to support SMEs to introduce AI into their businesses and undertake research, product development, testing, and validation work to create new solutions through the Industrial Research Assistance Program’s AI Assist Program

Other measures included:

• Immediate tax relief for the cost of certain patents and computer equipment and software
• Further consultation on SR&ED including the possibility of expanding eligibility for the 35% refundable tax credit
• An additional $200M injected to the Venture Capital Catalyst Initiative (VCCI)
• Direction to the Business Development Bank of Canada to increase financing to high-growth firms
• And a new working group led by Stephen Poloz, former Governor of the Bank of Canada, to look at what is required to have Canadian pension funds invest more in home-grown companies.