Canada Introduces Productivity Mega Deduction to Spur Business Investment
On October 1, 2026, the Government of Canada launched the Productivity Mega Deduction, permanently expanding immediate expensing for businesses and lowering the marginal effective tax rate on new investment to 6.4%.
On October 1, 2026, the Government of Canada introduced the Productivity Mega Deduction, a policy that Minister of Finance and National Revenue François-Philippe Champagne described as one of the most significant changes to Canada’s business tax system in half a century. The initiative is designed to encourage businesses to invest in new equipment, adopt technology, and expand operations while creating jobs in communities across the country.
Under the new rules, the share of assets eligible for immediate expensing increases from roughly 15% to more than 65%. Eligible assets now include fibre-optic cable, greenhouses, mining property, oil and gas pipelines, software, research and development, computer equipment, aircraft, vehicles, patents, rail track, bridges, and roads. The federal government is making immediate expensing permanent to provide long-term certainty for major investment decisions.
These changes are expected to lower the marginal effective tax rate on new business investment from approximately 13% to 6.4%. According to the government, this positions Canada with the lowest rate among major economies and less than half the rate in the United States, giving it the best tax treatment for new business investment in the G7.
Over five years, government capital investments and incentives totalling about $280 billion are expected to enable more than $1 trillion in total investment from public, private, and institutional partners.
Federal officials highlighted the deduction at events across the country. Wayne Long, Secretary of State (Canada Revenue Agency and Financial Institutions), participated in an event in Saint John, New Brunswick. Evan Solomon, Minister of Artificial Intelligence and Digital Innovation, took part in an event related to Southern Ontario. Ruby Sahota, Secretary of State for Combatting Crime, attended events in St. Catharines, Ontario.