The federal government is expanding a tax incentive to cover a broader array of assets as it aims to drive $1 trillion of new investment in a move roundly applauded by business groups.
Prime Minister Mark Carney announced the “productivity mega deduction” during the Canada Investment Summit underway in Toronto. It builds on a measure introduced in budget 2025.
In a speech to the summit Tuesday, Carney said the move will help make Canada “by far the most tax-competitive advanced economy for new business investment,” with the lowest marginal effective tax rate in the G7. The rate drops to 6.4 per cent from 13 per cent with the move and is less than half that of the United States, the government said.
“Put simply: your investment dollars will go a lot further in Canada than anywhere else in the advanced world,” Carney said.
The 2025 deduction allowed businesses to immediately deduct 100 per cent of the cost of some investments, such as machinery, equipment and technology. It applied to about 15 per cent of investment in capital assets.
Under the updated measure, two-thirds of assets now qualify with a broader range of items included, such as fibre-optic cable, mining property, oil and gas pipelines, software, research and development, computer equipment, aircraft and vehicles, patents, rail track, bridges and roads.
“One of the reasons why we decided, after careful consideration, to make it so broad is this is one of the initiatives where businesses decide, Canadians decide where they want to invest, where they see opportunity,” Carney told reporters.
The Canadian Chamber of Commerce had been urging such a move from Ottawa, said chief executive Candace Laing.
“This announcement is a launch pad to make Canada globally tax competitive. This is a moment we’ve been waiting for,” she said.
“The permanency of this deduction at these levels will draw the attention and interest of investors in Canada for longer than any summit could last. We’ve thrown our hat over the fence. Execution remains to be seen, but the business community is ready.”
The change is expected to have a fiscal cost of $36 billion over five years, starting this year, according to a government backgrounder document.
The tax perk, known as immediate expensing, allows businesses to fully write off the cost of an investment in the year that it becomes available for use. The federal government said Tuesday it will be permanent.
“This is one of the most significant changes to Canada’s business tax system in half a century, and a game changer for investment in this country,” FranÇois-Philippe Champagne, the federal finance minister, said in a news release.
The move represents a “timing difference” for businesses, getting them access to a deduction they’re entitled to, but sooner than would otherwise be the case, said Brian Ernewein, senior adviser at KPMG Canada.
“It’s kind of like the government giving the taxpayer an interest-free loan equal to the current tax saved on the accelerated writeoff,” he said.
The change is “very meaningful” for a broad range of businesses, Ernewein added.
“It would be the most capital-intensive… industries that benefit, including, in this particular case, some oil and gas or resource industries.”
Indeed, the Canadian Association of Petroleum Producers was among the business groups cheering the announcement.
“Canada’s largest competitor for upstream oil and natural gas investment is the United States, and the Productivity Mega Deduction closes a significant competitive gap between the two countries in terms of capital cost expensing,” said Lisa Baiton, the group’s chief executive.
Deborah Yedlin, head of the Calgary Chamber of Commerce, said the move “will help reduce risk and provide greater clarity and certainty for investors before capital is committed.”
Not everyone was celebrating though. Keith Stewart, senior energy strategist at Greenpeace Canada, decried the federal efforts to boost investment in oil and gas.
“The new tax breaks for fossil fuel megaprojects alongside the gutting of environmental protections to fast-track their construction is an act of climate vandalism that will have global impacts,” he said.
“Carney wants us to believe the climate can wait, but every new billion invested in oil and gas costs us much more in wildfires, floods and crazy weather that destroy homes and lives.”
This report by The Canadian Press was first published Sept. 15, 2026.