Canada protects its least productive companies and its most unproductive asset class — housing — at the expense of its most ambitious people.
Internal trade barriers alone cost Canada 7% of GDP. Add protected telecom, banking, airlines, and supply-managed dairy, poultry and eggs, and Canadians are paying billions more than they should every year.
Seven reforms can make Canada the most competitive economy in the G7: reward productive investment, eliminate capital gains on startups, end housing as a tax shelter, open the internal market, break up protected sectors, slash barriers to entry, and deploy pension capital for Canadian innovation.
Summary
Canada has become a country where it’s easier to trade with foreign nations than between its own provinces. Where a handful of big companies in telecom, banking, airlines, as well as supply management charge Canadians more because government policies shield incumbents from competition. Where the tax code rewards buying and selling houses more than building businesses that sell to the world.
This is the result of choices that can be reversed. This first memo of the Building Canada as a Superpower series lays out seven reforms to make Canada the most competitive economy in the G7. Detailed policy proposals for several of these areas — including telecom reform, housing taxation, zoning reform, interprovincial trade, and capital gains reform — have been published separately by Build Canada. This memo shows how they fit together into a single competitiveness agenda.
Narrative
Canadians pay some of the highest prices in the developed world for the basics of modern life — and it doesn’t have to be this way.
Canada’s wireless prices rank among the top three highest in the G7, with prices on popular usage plans being 11% to 76% higher than comparable plans in other countries.1 The average Air Canada domestic fare in 2024 was $694 — compared to $382 for the average U.S. domestic fare.2 About 35% of the cost of a Canadian airline ticket goes to government and airport mandated fees, compared to a fraction of that in the United States.3 And Canada’s supply management system — a government-enforced cartel covering dairy, chicken, turkey, and eggs — uses production quotas and tariffs of up to 300% on imports to keep prices artificially high. According to the OECD, supply management costs Canadian consumers $2.6 to $3.6 billion more per year than they would pay in a competitive market.4 A University of Manitoba study found the system is regressive: it costs the poorest 20% of households $339 per year — the equivalent of a 2.3% tax on their incomes.
This isn’t because Canada is remote or small. It’s because Canada has chosen to protect big companies from competition rather than protect consumers from big companies.
Four wireless carriers. Six banks holding 93% of all banking assets.5 Two airlines controlling 74% of domestic seats.6 A supply management regime that shields roughly 16,000 quota holders from any meaningful competition — while 41 million consumers pay the price. These are protected positions that charge Canadians more because they can.
Then there’s the internal trade wall. Canada is the only developed country where it’s easier to trade with other nations than between its own provinces. The IMF estimated in January 2026 that these barriers equal a 9% internal tariff — and that removing them could boost real GDP by nearly 7%, or roughly $210 billion.7 That’s more than the combined GDP of all four Atlantic provinces — and larger than the estimated cost of U.S. tariffs on Canada.
What does this look like? A plumber licensed in Ontario can’t work in Quebec. A truck from Vancouver to Halifax crosses different regulatory regimes in every province. A nurse trained in Alberta must recertify in B.C. These aren’t safety measures — they’re barriers that keep the Canadian market small and fragmented.
The tax code makes it worse. Investing in your home is more tax-advantaged than investing in a startup. The capital gains exemption on a primary residence means billions flow into bidding up house prices instead of into machinery, technology, or businesses. As Build Canada’s Reward the Risk Takers memo showed, Canada’s capital gains policies are so uncompetitive that U.S. investors are requiring Canadian companies to reincorporate in America just to access better tax treatment. Every dollar going into bidding up housing is a dollar not going into building something.
Then there’s the capital gap. Even when Canadian entrepreneurs do start companies here, they can’t scale them. The share of Canadian-founded companies actually built in Canada has collapsed. They leave because the risk capital isn’t here. Canada invests just 0.35% of GDP in venture capital — half the U.S. rate. Meanwhile, $2.5 trillion sits in the Maple 8 pension plans, almost none of it flowing to Canadian startups. Over 15 years of government-run programs have failed to close the gap. The result: Canada produces the talent and the ideas, then watches them leave.
Every rising power in history made the opposite choices. They broke up protected companies, eliminated internal barriers, taxed speculation, and rewarded production. Canada can do the same.
Existing Solutions
Ireland: Competitive Tax Code. Ireland cut its corporate rate from 40% to 12.5% between 1995 and 20038 and offers a 30% R&D credit.9 Nominal GDP per capita rose from ~$14,000 to over $100,000 by 2023.10 Tax policy that attracts productive investment can reshape an economy.
Australia: Internal Market Unification. Australia’s 1995 National Competition Policy eliminated inter-state barriers. The Productivity Commission estimated selected reforms boosted GDP by at least 2.5%.11 One unified domestic market is worth more than a patchwork of provincial fiefdoms.
United Kingdom: Pro-Competition Reform. After finding its largest banks didn’t compete hard enough,12 the CMA ordered structural reform — mandating open banking13 and licensing over 40 challenger banks since 2013.14 By 2024, over 11 million UK consumers used open banking services.15 When a regulator forces incumbents to open up, consumers win.
What Must be Done
These seven reforms work together. Individually, each would move the needle, and together, they can transform Canada’s competitive position within a decade.
1. Cut corporate taxes to reward productive investment. Canada’s combined federal-provincial rate sits between 23% and 31%.16 Small businesses get a reduced federal rate of 9%, but only on the first $500,000 of active income17 — then jump to the full rate. The system tells companies: stay small. Meanwhile, Ireland charges 12.5% on all active business income with no size cap.18
Canada should create a “Productive Investment Rate” by amending the general rate reduction under Part I of the Income Tax Act.19 Any corporation that reinvests more than 15% of gross revenue in qualifying domestic expenditure — machinery, R&D salaries, workforce training — gets a federal rate of 5% instead of 15%, bringing the combined total to roughly 10–15%. Share buybacks, executive bonuses, and real estate don’t qualify. Spending that builds should get the lower rate.
2. Eliminate capital gains tax entirely on shares purchased in any Canadian company valued below $100 million at the time of purchase and conducting active business. This applies to founder equity, sweat equity held by early employees, and shares bought by angel investors and venture capitalists. It covers everything from a tech startup to a franchise to a junior mining company on the TSX Venture Exchange. Today, the U.S. QSBS exemption eliminates capital gains on companies under $50 million in assets. Canada should leapfrog this threshold, not match it. Setting the bar at $100 million would make Canada the most attractive jurisdiction in North America for early-stage investment overnight, and would stop the bleeding of Canadian companies reincorporating in the U.S. just to access better tax treatment. This is bolder than Build Canada’sReward the Risk Takers memo, published in mid-2025, because we continue to lose investors and entrepreneurs to the U.S.
3. Redirect capital from housing to production. The centrepiece reform is simple: eliminate the capital gains exemption on primary residences above $1 million. Right now, someone who sells a $15 million home in Forest Hill pays zero tax on the gain. A primary residence should be a place to live, not a tax planning vehicle. The exemption below $1 million protects ordinary homeowners. Above that threshold, gains should be taxed like any other investment income. This alone would redirect billions of dollars in capital toward productive assets — businesses, machinery, technology — instead of bidding up house prices.
On the supply side, housing is primarily a provincial and municipal problem. The federal government cannot directly override municipal zoning, that power sits with the provinces. Ontario’s government has already made progress on planning and zoning reform, and other provinces should follow. What the federal government can do is use its fiscal tools such as infrastructure funding, mortgage insurance rules, and transfer payments, to create powerful incentives for provinces and municipalities that allow more density, reduce approval times, and build more homes. Build Canada’s memos onhousing taxation andzoning reform detail specific proposals.
4. Eliminate interprovincial trade barriers. Create a single Canadian internal market with unified standards, mutual recognition of professional credentials, and free movement of goods and services. The November 2025 agreement on goods was a start — but services, which make up four-fifths of the potential GDP gains, were largely excluded.20 Finish the job. Build Canada’sinterprovincial trade memo details specific implementation steps.
5. Break open protected sectors to real competition. Canada’s telecom, banking, airline, and supply-managed agricultural markets are dominated by a handful of companies or quota holders that face little threat from new competitors. Recent amendments to the Competition Act are a step forward, but the fundamental problem remains: Canada defaults to protecting incumbents rather than enabling challengers. The fix is structural, not just enforcement.
In telecom, allow foreign ownership, auction a single national spectrum licence to guarantee a pure-play wireless competitor always operates, open the MVNO market to any entrant regardless of whether they own infrastructure, and mandate that the CRTC resolve regulatory disputes within 90 days so incumbents can no longer use delay as a weapon. If these measures fail to cut wireless prices by at least 30% within five years, pursue structural separation of telecom infrastructure from retail service — as New Zealand did with Chorus. Build Canada’saffordable telecom memo lays out the full plan.
In banking, issue new licences for digital-only banks — as the UK did after 2013, licensing over 40 challenger banks that now serve tens of millions of customers. Mandate open banking so consumers can move their data freely between providers, just as the UK’s Competition and Markets Authority required starting in 2018. In airlines, allow foreign ownership.
In supply-managed agriculture, phase out the supply management system for dairy, poultry, and eggs over a defined transition period. Transition to an open, competitive market. Australia and New Zealand both dismantled their dairy supply management systems and saw their industries become more competitive, more innovative, and more globally successful.
The goal is simple: more competitors means lower prices and better service for Canadians.
6. Slash barriers to starting and scaling a business. Introduce a mandatory sunset clause for all federal regulations. Every regulation expires after ten years unless a department can demonstrate through a published cost-benefit analysis that the regulation’s benefits exceed its costs and that it remains necessary. This forces a regular cleanup of the rules that have accumulated over decades. Departments that cannot justify their rules lose them automatically.
Reduce federal business formation time from 5–10 days to under 24 hours. Estonia and New Zealand already do same-day registration.21 There is no reason it should take a Canadian entrepreneur longer to register a company than to order a piece of furniture online. A single digital portal, modelled on Estonia’s e-Residency program, should handle incorporation, tax registration, and basic licensing in a single session.
7. Deploy Canada’s pension capital to fund Canadian innovation. None of the other reforms in this memo will matter if Canada can’t keep its best companies. Canada’s eight largest pension plans — the Maple 8 — manage $2.5 trillion in assets and are considered a global gold standard. Yet almost none of that capital flows to Canadian startups. Over 15 years of government-run programs like VCAP, VCCI, Superclusters, and SIF have failed because government employees aren’t equipped to make investment decisions.
The fix: the Maple 8 should be mandated to invest just 0.2% of assets – roughly $5 billion – to Canadian-domiciled innovation each year for the next 20 years. The pension plans choose how to invest: directly, through VC funds, or both. A portion must target early stage companies, including Series A and earlier. Use CDPQ’s dual mandate (optimal return and Quebec development) as a model.
The government should get out of the business of direct investing. Consolidate all government innovation equity investing (including the BDC and EDC) and spending into a single program that invests $2.5 billion per year as a stakeholder alongside the Maple 8 mandate.
Implementing this plan would provide a total of $7.5 billion of innovation capital a year for 20 years, managed by professional investors. With an average annual return of 7-8% across the Maple 8 over the past 10 years, 0.2% of assets per year is a relatively small amount, but would make an incredible difference for Canada’s startups. A 20 year mandate provides certainty that capital will be there over the long-term. Israel’s Yozma program has already proved that this model works. Government co-investment via that program triggered a 60-fold increase in venture capital funding.22
Common Questions
Q: Won’t these reforms just benefit the wealthy? Every reform targets Canadians who build, work, and compete. The corporate tax cut only applies to companies reinvesting in Canada. Capital gains elimination targets companies under $100 million. Breaking open telecom and banking means lower prices for every household. Taxing luxury home gains redirects capital from speculation to production.
Q: Can Canada actually become more competitive than the United States? Not in scale. But Canada can be the easiest place in the G7 to start and scale a business. Ireland is smaller but more competitive. The UK opened banking to 40+ challengers. Estonia lets you register a company in hours. None are bigger than Canada — they’re just faster and more willing to make bold choices.
Q: Are these reforms politically realistic? Every reform has been done somewhere else. Ireland cut its corporate tax. Australia unified its internal market. The UK forced open banking. Estonia digitized registration. The ideas aren’t new. What’s been missing is the will to implement them all at once, as a single competitiveness agenda.
Conclusion
Canada protects its least productive companies and its most unproductive asset at the expense of its most ambitious people. Interprovincial barriers cost $210 billion a year. Protected oligopolies extract billions more. The tax code punishes companies that grow, drives entrepreneurs to incorporate in Delaware, and lets $15 million homes pay zero capital gains.
These are choices. They can be unmade. Seven reforms — a productive investment tax rate, capital gains elimination for early-stage companies, an end to housing as a tax shelter, a unified internal market, open competition in protected sectors, frictionless business registration, and pension capital for innovation — would make Canada the most competitive economy in the G7. Every one has been done somewhere else. The question is whether Canada has the will to do them all at once.
