Canada's new artificial intelligence strategy is long on words but short on the tax measures needed to spur innovation, according to tax expert Kim Moody. Writing in the Financial Post, Moody argues the 50-page document prioritizes political objectives over economic competitiveness, missing the core issue of how to encourage founders, engineers, and investors to take risks.
Strategy misses tax levers
Moody, a director at Moodys Gartner Tax Law LLP, says tax policy is one of the most powerful tools to shape economic behaviour. It drives investment decisions, determines where talent chooses to live, and signals whether a country is serious about competing. Yet the AI strategy contains no corporate tax commentary, no patent box proposals despite two years of consultations and a Liberal 2025 election platform promise, and no personal tax or capital gains ideas.
The sole tax gesture in the document is a commitment that by "Budget 2026, the Department of Finance will work with experts to explore mechanisms that encourage Canadians to reinvest gains earned from successful tech companies into new Canadian AI startups." Moody questions who those experts will be and why only AI startups are targeted, noting AI impacts all businesses.
Competitors offer stronger incentives
Moody contrasts Canada's approach with that of the United States. In July 2025, the U.S. permanently restored full expensing of domestic R&D, reinstated 100 per cent bonus depreciation on qualifying capital investment including AI infrastructure, and expanded the qualified small business stock exclusion to US$15 million. These measures dramatically lowered the effective tax cost of AI investment.
"Glaringly missing is how the founders, engineers and investors who will build Canada's AI future will be encouraged to take the necessary steps and risks," Moody writes.
Focus on control over competitiveness
Instead of focusing on economic matters such as taxes, the strategy devotes space to protecting Canadians from AI, Indigenous data governance, diversity, equity and inclusion in AI development, and online safety for children. Moody acknowledges these may be worthy concerns but says "a government that leads with control rather than competitiveness has already revealed its priorities."
Moody recalls his grade school essay assignments where teachers told him he missed the core ideas. "My teachers' voices were loud and clear," he says, applying the same critique to the government's AI plan.
Investment and risks
Investment in AI can create jobs, drive efficiency and productivity, spawn new technologies and assist overall economic growth, Moody notes. But the downsides — labour market disruption, safety concerns, over-reliance by youth — are real. A genuine strategy would seriously grapple with both sides, he argues.
The article concludes that Canada's AI strategy compounds the taxation mistakes the federal government is already making, failing to provide the incentives necessary to win the global AI race.
