Overview
- Prime Minister Mark Carney announced the permanent Productivity Mega Deduction at the Canada Investment Summit in Toronto on Tuesday, Sept. 15, expanding immediate expensing to about 65% of new capital assets.
- Immediate expensing lets firms write off the full cost of qualifying assets in the year they are put into service, which gives businesses a timing benefit that raises after-tax returns and can speed investment decisions.
- The government says the change will lower Canada’s marginal effective tax rate on investment from 13% to 6.4% and could help attract up to $1 trillion in new investment while costing roughly $36 billion over the first five years.
- Major business groups and some provincial leaders hailed the move as a competitiveness and investment catalyst, while environmental advocates warned it will ease financing for fossil-fuel and other carbon-intensive projects and risk Canada’s climate targets.
- Economists welcome the incentive’s potential to front-load spending but caution the size and timing of any investment surge are uncertain and that outcomes will hinge on implementation details and broader trade and market conditions.