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Canada launches Productivity Mega Deduction: immediate full expensing for business investment, lowest tax rate among major economies
Ottawa announced September 29 the biggest business-tax overhaul in half a century: immediate expensing expands from 15% to over 65% of assets, marginal effective tax rate on new investment falls to 6.4%.
Why it matters
The federal government announced on September 29 the new "Productivity Mega Deduction," billed as one of the most significant changes to Canada's business tax system in half a century. Businesses will be able to immediately deduct the full cost of a much broader range of investments, a move Ottawa says will trigger an investment supercycle, create jobs and lift productivity.
The marginal effective tax rate on new business investment will fall from roughly 13% to 6.4% — the lowest of any major economy and less than half the U.S. rate.
Key details
The share of assets eligible for immediate expensing rises from roughly 15% to more than 65%, covering fibre-optic cable, greenhouses, mining property, oil and gas pipelines, software, R&D, computer equipment, aircraft and vehicles, patents, rail track, bridges and roads. Immediate expensing is also being made permanent, giving businesses long-term certainty for major investment decisions.
Secretary of State (Labour) John Zerucelli, speaking at an event in Barrie, Ontario, said: "In this period of global uncertainty, Canada is turning our strengths — talented workers, innovative businesses, and strong finances — into a competitive advantage." Finance Minister François-Philippe Champagne called the measure "a game changer for investment in this country."
Source
Employment and Social Development Canada official news release, September 29, 2026.
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