A majority of Canadian business leaders want the federal government to regulate Artificial Intelligence (AI) quickly and to provide incentives to keep Canadian research, talent and data on home soil, according to recent KPMG in Canada polling.
In a survey of 750 business leaders, more than nine in 10 (92 per cent) said the federal government should regulate AI as soon as possible. The same proportion (92 per cent) said Canada’s approach to regulating AI should be agile, flexible and relatively light in touch because the technology advances too quickly.
Nearly all respondents, some 94 per cent, agreed Canada’s AI policy must include a reasonable, uncomplicated and enforceable set of regulations aligned with broader global standards to allow for accelerated adoption.
“Canadian business leaders expect the federal government to take a nuanced, balanced approach to regulation, but to also move quickly,” stated Jillian Frank, partner and national leader of Legal Transformation, Technology and Managed Services at KPMG in Canada. “Canada will have to make difficult decisions that balance the interests of protection from AI risks, reducing complexity of regulation and incentivizing development in Canada.”
Frank says that striking a balanced approach to regulation in a quick timeframe is possible if the government acts quickly, but “Canadian companies may need to give the government space to take an agile approach – for example, start with lighter regulation based on existing privacy, human rights, IP and consumer protection standards, and adjust later to ensure appropriate enforcement and learn from the experiences of other jurisdictions like the EU.”
Almost 90 per cent of those surveyed would like to see the federal government establish cross-jurisdictional AI sandboxes, for example, joint testing environments with allies such as the United Kingdom and European Union, allowing for iterative experimentation.
Additional research by KPMG International shows three quarters of Canadians also want AI regulation, five percentage points higher than the global average.
Canada does not currently have a federal regulation for AI, but in recent months the new federal government has signalled an interest in accelerating AI regulation after the appointment of a first-ever Minister of Artificial Intelligence and Digital Innovation, making Canada one of the few countries in the world to establish such a position.
“Establishing laws and regulations that can keep pace with and adapt to AI’s rapid advancements will give organizations the confidence to be more innovative in their approach to AI. Regulatory clarity around the use of AI will empower Canadian businesses to accelerate their AI adoption and enable them to implement the technology at scale,” added Frank.
She notes that nine in ten business leaders think Canadian governments should incentivize Canadian businesses to adopt AI by streamlining regulations and cutting red tape. “With a lower regulatory and administrative burden, organizations will be able to implement AI more quickly and efficiently and increase their productivity and growth.”
The Canadian government has also announced other measures to support broader AI adoption, including a 20-per-cent tax credit for small- and medium-sized businesses to implement AI. Eighty-seven per cent of respondents said this is much needed and long overdue.
“Giving small and medium-sized businesses tax credits to adopt AI is a great start, and leaders tell us this kind of support is long overdue. But our research is clear; almost nine in 10 organizations want more help, whether that’s low-interest loans, grants or R&D funding, to really unlock AI’s potential for growth and innovation,” stated Davin Gnanapragasam, partner and national leader for Ignition Tax and Chief Technology Officer for Tax & Legal at KPMG in Canada.
More than nine in 10 surveyed business leaders agree the Canadian government must provide more and better incentives for knowledge workers to develop intellectual property and remain in Canada, while a similar proportion want incentives for hyperscalers to participate in sovereign data initiatives so data can stay within Canada.
“Canada was a pioneer in AI, with some of the best talent and research in the world. But over time, we’ve seen our edge slip as other countries have invested more and pulled our people and ideas away,” explained Gnanapragasam. “Canadians are telling us they want stronger incentives to keep our talent and IP here at home, and that’s going to be critical if we want to grow and compete in a global AI economy.”
With nation building being a major priority in the government’s agenda, infrastructure projects will remain a key focus for business leaders and investors over the next few months and years. Ninety-two per cent of survey respondents want the government to focus on building more AI compute, which includes digital infrastructure such as data centres, cloud computing capacity and procuring cutting-edge chips.
The government has pledged $2.5 billion over the next two fiscal years for digital infrastructure such as data centres and broadband networks, and while respondents were supportive of the investment, a strong majority of respondents said the amount falls short.
The federal government recently asked its new Major Projects Office to develop a Canadian sovereign cloud to build data centres and compute capacity to give Canada independent control over its own computing power.
“Canadian data is often processed in servers located or controlled outside our borders, which exposes organizations to potential risks in the event of geopolitical conflict or foreign legal claims,” explained Gary Filan, partner and Canadian AI lead at KPMG in Canada. “Building a sovereign cloud on home soil strengthens Canada’s digital sovereignty and control. True resilience, however, requires more than geography; it demands governance, transparency and trusted partnerships with global cloud providers.”
