Canadian business leaders are urging the federal government to implement a federal regulatory framework for artificial intelligence as soon as possible, according to the “KPMG in Canada AI Business Adoption Survey.”
Ninety-two percent of leaders supported this call, with the same percentage of respondents indicating that the AI regulation approach should be adaptive and light in consideration of the rapid pace at which AI technology advances. Ninety-four percent indicated that Canada’s AI policy should be “reasonable, uncomplicated, and enforceable,” per KPMG in Canada.
Regulations should be aligned with international standards to facilitate quick adoption, 94 percent of respondents said.
“Canadian business leaders expect the federal government to take a nuanced, balanced approach to regulation – but to also move quickly. 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,” said Jillian Frank, KPMG in Canada’s national leader of legal transformation, technology and managed services, in a statement.
Eighty-eight percent of respondents urged the government to set up cross-jurisdictional AI sandboxes with allies like the UK and the European Union to facilitate iterative AI experimentation.
Frank said the government could act quickly to develop a balanced regulatory approach, but 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,” Frank said.
Improved incentives
Eighty-seven percent of respondents said the recently announced incentives offered to local businesses that adopt AI, which include a 20 percent tax credit for small and medium-sized businesses, was necessary and overdue. However, 91 percent of respondents wanted Canadian governments to improve the incentives.
“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,” said Davin Gnanapragasam, KPMG in Canada’s national leader for ignition tax and chief technology officer for tax and legal.
Gnanapragasam added that Canada needed to convince local knowledge workers to keep developments in 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. 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,” Gnanapragasam said.
Digital infrastructure
Ninety-two percent of leaders also called for the government to prioritize building AI compute, including digital infrastructure like data centers, cloud computing capacity, and cutting-edge chip procurement. While the government has allocated $2.5 billion to digital infrastructure over the next two fiscal years, 88 percent of respondents found this inadequate.
“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. Building a sovereign cloud on home soil strengthens Canada’s digital sovereignty and control,” said Gary Filan, KPMG in Canada’s Canadian AI lead. “Strong encryption and key management can mitigate cross-border risks, but organizations must also weigh trade-offs around cost, performance, and acceptable levels of residual risk.”
The federal government announced that it had requested the major projects office to develop a Canadian sovereign cloud to build data centres and compute capacity, enabling Canada to manage its own computing power.
The “KPMG in Canada AI Business Adoption Survey” obtained feedback from 750 business leaders. The survey ran from August 15 to September 3.