How economic innovation, tax reform could shape Canada’s upcoming federal budget

Initiatives aimed at driving economic innovation, along with updated tax governance, are expected to shape Canada’s 2025 federal budget. These initiatives reflect a broader effort to position Canada as a competitive, forward-looking economy while working to ensure fair, efficient tax administration.

Modernizing Canada’s economy and improving tax administration are expected to form the core of the upcoming federal budget.

In addition to tax measures designed to provide support amid ongoing volatility, Canadians can anticipate new economic initiatives that prioritize sustainable growth—particularly regarding critical minerals, artificial intelligence and biotechnology investment.

This budget, which Prime Minister Mark Carney’s government will present on Nov. 4, also marks the first in the government’s new capital budgeting framework that will see federal budgets released in the fall going forward.

Here is a look at how economic and regulatory innovation could shape the federal budget and what it could mean for Canadian businesses and individuals.

Prudent taxpayers should consider consulting the appropriate advisors before and after the budget’s release to stay apprised of potentially beneficial programs and tax enforcement changes.

Strengthening support for critical mineral exploration

The new budget could expand on the existing 30 per cent critical mineral exploration tax credit (CMETC) and the 15 per cent mineral exploration tax credit (METC) that was extended to March 31, 2027

These credits are designed to attract investment into Canada’s resource sector, particularly in remote and northern regions. Potential changes could include broadening the scope of eligible minerals, increasing incentives for Indigenous-led projects and integrating exploration credits with downstream clean technology manufacturing incentives.

These measures align with the Liberal Party’s strategy to build a resilient and sustainable clean energy supply chain.

Unlocking modern economic investment

A new flow-through share regime that could stimulate innovation and productivity may also feature in the upcoming budget.

This mechanism would be tailored to high-growth sectors such as AI, biotechnology, quantum computing and advanced manufacturing. Its implementation could allow investors to benefit from the research and development expenses incurred by the companies they support.

The tax community previously advocated for such reforms as a flow-through share regime would encourage private capital investment into early-stage innovation.

The federal budget 2025 may also introduce a patent box regime to incentivize commercialization of Canadian intellectual property.

Advancing responsible AI adoption

Canada’s AI ecosystem is poised for further cultivation following the launch of the federal government’s $2 billion sovereign AI compute strategy—which includes the AI compute access fund.

These initiatives are meant to provide Canadian innovators with access to high-performance computing infrastructure and support the scaling of domestic AI solutions.

The federal budget may introduce formal governance frameworks for AI, including legislated standards for risk assurance, ethical oversight and transparency.

These developments would be welcome news for the tax community, which previously called for clear regulatory guardrails to ensure responsible AI adoption. Introducing these measures would further emphasize the importance of public trust and accountability in the deployment of AI systems.

Modernizing the CRA’s audit process

Building on draft legislation introduced in August, tax administration reform is another area where significant changes are anticipated.

Streamlining the Canada Revenue Agency’s (CRA) dispute resolution processes by shifting certain audit-related cases to the Tax Court of Canada and removing the requirement for large corporations to prepay disputed reassessments are among the tax community’s recommendations for regulatory change.

If included in the federal budget, these changes could help reduce administrative burdens, improve audit efficiency and enhance taxpayer confidence in the system.

Disclosure requirements

Significant increases to reporting and disclosure remain an ongoing trend in Canadian tax developments. This push towards greater disclosure may continue with the 2025 federal budget.

However, criticisms with the scope of newly introduced disclosure rules—including proposed non-profit reporting rules capturing small and/or non-income earning organizations—have led to some legislative movement in the other direction. This includes draft legislation released in August 2025 to narrow the trust reporting rules.

Instead of legislative changes, the government may employ an approach similar to what it did with mandatory disclosure rules, where the CRA issued non-legally binding guidance to narrow the rules’ scope.