OTTAWA — Prime Minister Mark Carney recently shared insights on the federal government's collaboration with the tech industry during a speech in Montreal. He revealed that the government sought assistance from Shopify to improve a key innovation policy included in the latest federal budget. "We went to Shopify and said, 'Can you help us redesign this process?' Somewhat embarrassingly, they came back in 48 hours and said, 'Do this.' We looked at it for three months and then we did what they said," Carney said, eliciting laughter from the audience at the Chamber of Commerce of Metropolitan Montreal on November 14.

Carney addressed the scientific research and experimental development tax credit, known as SR&ED, which has become increasingly cumbersome for small and medium-sized businesses that rely on it for funding research and development. Shopify, a prominent e-commerce company based in Ottawa, has not operated as a small business for over a decade but provided valuable insights to the government as it aims to resolve ongoing productivity challenges faced by Canadian firms.

Since the spring election, tech industry representatives have noted that the Carney administration has been more responsive to their concerns. The SR&ED tax credit, which is crucial for emerging tech firms, has become a focal point in this renewed relationship. In the last fiscal year, the SR&ED program allocated approximately $4.5 billion to over 22,000 applications from Canadian companies. Although the government does not disclose individual recipients, Budget 2025 indicated that 64 percent of applicants are small or medium-sized businesses.

"SR&ED really is kind of the crown jewel in the government's innovation programming," said Ben Bergen, president of the Council of Canadian Innovators, which advocates for the tech sector. At the Elevate tech conference in Toronto, Shopify president Harley Finkelstein criticized the complicated application process for SR&ED, which has led to a rise in consultants who assist businesses in navigating the system. The Council of Canadian Innovators estimates that 25 to 33 percent of SR&ED funding is spent on consultants or financing costs rather than directly benefiting the companies.

In September, Finkelstein shared his concerns about SR&ED in a memo posted on the Build Canada website, a platform promoting open discussions on Canadian tech policy. He personally delivered the memo to Finance Minister François-Philippe Champagne, praising him as an "incredible minister" who "really does listen."

The federal budget proposals align closely with Finkelstein's suggestions, including a plan to provide SR&ED funding approval upfront instead of as a rebate after project completion. Bergen noted that this change could significantly impact the types of projects firms are willing to pursue, as it would provide assurance of pre-approved funding. "Firms are now going to be taking potentially bigger bets in applying for that money if they know that they're getting it up front rather than at the end," he explained.

The budget also proposes to double the annual limit for SR&ED expenditures to $6 million and to utilize artificial intelligence to reduce the administrative burden associated with Canada Revenue Agency audits. Bergen emphasized that modernizing SR&ED, a program that has remained largely unchanged for about 30 years, has been a priority for the Council of Canadian Innovators.

Bergen described the current climate as a "relationship rebooting" between the federal government and the tech industry under Carney and Champagne. He interpreted Carney's acknowledgment of Shopify's contributions as a sign of increased engagement with the tech sector. "The relationship has been very positive and it's been really one where consulting with industry has been really collaborative," Bergen stated.

John Fragos, Champagne's press secretary, confirmed that Ottawa conducted extensive consultations with industry leaders and innovation experts to address the needs of Canadian tech companies. "We engaged with Shopify as a major homegrown technology leader, drawing on their experience to assist budget proposals that would help scale R&D in Canada and leverage Canada’s tech advantage," he said.

Matt Malone, an assistant professor at the University of Ottawa's faculty of law, emphasized the importance of engaging with tech leaders who understand the challenges posed by bureaucratic processes. He noted that Finkelstein's memo is a constructive example of fostering public debate on legislation. However, he cautioned against the potential pitfalls of influence without transparency in discussions about policy.

Malone pointed to a recent memorandum of understanding between the government and Cohere, a Toronto-based AI company, as an example of vague agreements lacking specific details on collaboration and funding. He expressed concern over the lack of clarity in how such partnerships are implemented within the federal public service.

Additionally, Malone highlighted that Ottawa has not fulfilled its obligations under the Lobbying Act, which mandates a review every five years. He noted that the act does not require executives who lobby government officials to register unless lobbying is part of their full-time duties. "You want to be able to see what's happening because otherwise we quickly turn into influences happening in corridors of power where you don't know what's going on, and that's a concern," Malone said.

Bergen concluded that further work is needed on tech policy, particularly regarding sovereignty and ensuring that federal funding supports genuinely domestic firms during economic disruptions. He stated that the Council of Canadian Innovators aims to build consensus across the tech industry to provide the government with clear policy direction beyond SR&ED, emphasizing the importance of fostering both wealth and sovereign capabilities in Canada.