The 2021 Federal Budget: What’s in it for Canadian Innovators?

On April 19th, 2021, Deputy Prime Minister and Finance Minister Chrystia Freeland presented the first Federal budget in two years. Despite the proposed $101 billion investment and projected $154.7 billion deficit in 2021-2, no personal or corporate tax increases are planned. The budget’s focus on economic recovery and growth means several measures and investments will benefit Canada’s leading technology and innovation sectors. It is described as “a plan to invest in Canadian innovation, for long-term growth.” (127)   

This blog post will focus on what we consider to be the announcements most likely to lead to direct funding for Canadian technology companies or startups, and less so on general economic or personal tax measures. For more information about the rest of the budget, we have linked some other helpful articles, as well as the full budget document, at the end of this post.   

Economic Recovery and Small Business Support  

The Canada Recovery Hiring Program (CRHP) will be introduced in June 2021 and stay in place until November 2021 (128). It will help Canadian-controlled private businesses hire more employees as the economy recovers from the COVID-19 pandemic. At its height, the program will cover up to 50% of incremental remuneration paid to employees, going down to 20% by the planned end of the program in November.   

Additionally, the government is extending the Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy programs until September 25th, 2021. These programs will see their subsidy rates go down gradually starting in July, right after the CRHP comes into effect. It is important to note that, when it comes to the CEWS and the CRHP, a business will only be able to use one of the programs but will be able to choose the one that would offer them the largest amount of support.   

The Canada Small Business Financing Program will see its annual funding increased by $560 million (135). This additional funding will serve a variety of purposes. Maximum loan amounts will be able to go from $350,000 to $500,000 and new loan classes will be introduced to better serve the startup and technology ecosystem: Intellectual property, as well as startup expenses, will become eligible for funding.  

To help small businesses adopt digital technologies, the government is introducing the Canada Digital Adoption Program (131). The program is expected to have an impact in two areas: job creation and helping SMEs adopt new digital technologies faster. “Main street” businesses with a storefront and business location will be eligible to receive microgrants to support costs associated with technology adoption. Manufacturers, processors and other SMEs will also be eligible to receive advisory services for technology planning and development of e-commerce strategies, as well as access to zero-interest loans with the Business Development Bank of Canada.   

Technology and innovation funding  

Zero-emission technology manufacturers will benefit from a new temporary tax reduction until 2032 (161-2). Their corporate tax rates will be slashed by 50% as of January 2022: from 9% to 4.5% for small businesses and from 15% to 7.5% for general corporations. These tax cuts are meant to facilitate the growth of the already significant clean manufacturing sector in Canada. While the products that make a company eligible for the tax cut will be re-evaluated with time, currently the tax reduction could apply to manufacturers of electric vehicles, solar panels, green hydrogen and many others.   

MITACS will receive $708 million over 5 years to create 85 000 work-integrated learning placements (130). MITACS work placements allow students in high technology and science fields to bring their skills to eligible companies. Their Accelerate internships generally offer $7,500 (or 50% of the intern’s total salary) per 4-month work term.   

NRC-IRAP will receive $500 million in funding over 5 years (139). These additional funds are expected to help support 2,500 more innovative SMEs across the country through the popular Industrial Research Assistance Program (IRAP).    

A total of $450 million is being made available for a Venture Capital Catalyst Fund to support innovative companies and entrepreneurs, $50 million of which will be reserved for the life sciences and health technology sectors (139).   

The Innovation Superclusters Initiative will receive an additional $60 million in funding over the next two years. The initiative, launched in 2018, includes five organizations across the country, each focusing on a key economic sector: advanced manufacturing, digital technology, plant protein and agricultural technology, oceans and artificial intelligence.   

The Pan-Canadian Artificial Intelligence Strategy will receive $ 443.8 million in the next 10 years (148). The funding will mainly go towards the commercialization of AI-related technologies and will also support several academic training and research initiatives.   

The government is also launching a new National Quantum Strategy to invest in companies, researchers and other major actors of the emerging quantum technology field. This new initiative represents an investment of $360 million (149).  

A Pan-Canadian Genomics Strategy is also in the works, with a total investment of $400 million over six years planned (150). Few details are currently available on how the funding will be administered for these new Quantum and Genomics initiatives, but more will be announced in the next few months.   

We hope that this overview of some key proposals found in the 2021 Federal Budget can be useful to you and your business. As previously mentioned, we have included some additional resources below if you want to find out more about the many measures included in the 2021 federal budget.   


Other resources:  

Highlights of budget 2021: Billions for green economic growth, healthier Indigenous communities (CBC) 

Budget 2021: Building an Innovation Economy of the Future (Government of Canada) 

Read or download the official 2021 Federal Budget here 

If you are wondering what funding is available for innovative companies at the provincial level, read our other recent blog post about the provincial Ontario and Quebec budgets here