Canadian business leaders want the federal government to prioritize competitiveness, tax reform and economic diversification in its 2026 budget, with nearly three-quarters saying reforms to strengthen Canada's competitiveness are more important than securing a trade agreement with the United States, according to a new KPMG survey.
The survey of 346 Canadian business leaders found 87 per cent support greater economic self-reliance and diversification, while 71 per cent are confident the upcoming budget will be business-friendly and improve their companies' growth prospects. However, smaller businesses expressed less confidence than their larger counterparts that the budget will address their needs.
KPMG's annual Federal Budget Survey comes as businesses contend with trade uncertainty, tariffs and geopolitical risks, with respondents looking for measures that support investment, accelerate major projects and improve Canada's ability to compete internationally.
"This year's federal budget is taking place during a period of significant policy and economic change, as Canada shifts from reacting to U.S. pressures to taking greater control of our economic future," says Lucy Iacovelli, KPMG's Canadian Managing Partner for Tax and Legal.
"We're seeing the government engage more with business, use tax policy to encourage investment, prioritize getting projects built, and reposition Canada on the world stage. Canadian businesses will be looking for budget measures that build on key commitments and reforms to help them compete and capitalize on new opportunities for growth."
Smaller businesses less confident
The survey found that 62 per cent of respondents identified the Canada-U.S. trade conflict and tariff impacts as pressing economic issues for the federal budget. Attracting foreign investment and retaining capital in Canada ranked second at 44 per cent, followed by accelerating major projects, including energy and infrastructure, and addressing cost pressures on businesses and households, both at 34 per cent.
Tax competitiveness and reform, along with reducing red tape, were identified by 26 per cent of respondents as priorities.
Confidence in the budget's potential to support growth varied significantly by company size. Among businesses with annual revenue of $10 million to less than $100 million, 54 per cent were confident the budget would support their growth prospects, compared with 82 per cent of companies generating $1 billion or more.
Business leaders were generally optimistic about Canada's economic outlook, although confidence was higher over the longer term. Fifty-nine per cent expressed optimism about the Canadian economy over the next 12 months, while 67 per cent were confident in the country's growth prospects over the next three years.
Two-thirds of respondents, or 66 per cent, said their organizations were adapting successfully to higher trade barriers and geopolitical risks. That figure fell to 51 per cent among businesses with revenue below $100 million, compared with 77 per cent among companies earning $1 billion or more annually.
Calls grow for comprehensive tax reform
Tax reform emerged as another major priority, with respondents indicating that targeted incentives alone would not be sufficient to improve productivity and strengthen Canada's competitiveness.
Nearly nine in 10 business leaders, or 87 per cent, said the federal government should conduct a comprehensive review of Canada's tax system. Another 85 per cent said the system should be simplified to reduce complexity, while 82 per cent said Canada needs to make its tax system more competitive.
"The government has already announced changes to fine-tune the tax system to support business investment, but it's happening at a time when the business community's calls for a broader overhaul of the tax system grow louder," says Lachlan Wolfers, National Leader, KPMG Law.
"While tax incentives can help drive specific outcomes, they are no substitute for comprehensive tax reform that improves competitiveness and reinvigorates the economy."
The findings suggest business leaders want the federal government to move beyond individual tax measures and undertake broader changes aimed at improving the business environment.
Businesses favour trade diversification
Despite the impact of tariffs, respondents indicated support for diversifying Canada's trading relationships and maintaining a firm position in negotiations with the United States.
More than three-quarters of respondents, or 76 per cent, said diversifying markets beyond the U.S. was more important than it had been six months earlier. Meanwhile, 84 per cent supported Canada's pursuit of a special partnership with the European Union and other stable trading partners.
The survey found 72 per cent believed Canada should hold out for a better trade deal with the United States, even if doing so caused some economic pain. Another 77 per cent said Canada was right to suspend trade talks with the U.S. and impose counter-tariffs.
Forty-five per cent said Canada should return to negotiations only when a better deal was achievable, while 23 per cent favoured immediately resuming talks without preconditions. In addition, 68 per cent were optimistic that new trade agreements with partners outside the U.S., including the United Kingdom, the European Union and India, would improve their business prospects.
"A majority of business leaders are prepared to be patient and wait to secure a trade deal with the U.S. until more favourable terms are available," says Robert Glasgow, Partner, Trade and Customs practice, KPMG Law.
"This finding is striking given that nearly seven in 10 leaders say mounting U.S. tariffs are forcing them to pass on significantly higher costs to their customers and clients."
While respondents expressed support for the government's trade position, the survey also found that counter-tariffs were creating challenges for many companies. More than half, or 55 per cent, said the measures were creating significant difficulties for their businesses, rising to 67 per cent in retail and wholesale trade and 64 per cent in agriculture, automotive, construction and manufacturing.
Technology companies were more optimistic about the potential benefits of new trade agreements and international partnerships, with 80 per cent expecting them to improve business prospects, compared with 68 per cent of respondents overall.
"The federal budget needs to give business leaders the confidence to act and the tools to make their businesses more competitive as Canada's economy adapts and undergoes a major transition," Glasgow concludes.