Ottawa proposes a mega deduction to encourage business investment

Ottawa proposed a mega deduction on September 15 to allow immediate expensing of more depreciable assets when available for use. Finance Canada estimates an additional fiscal cost of C$36 billion over five years, starting in 2026–27. [1]

How the mechanism would work

Announced at the investment summit in Toronto, the measure covers areas including equipment, software and certain infrastructure. The government wants a more lasting and predictable framework for businesses planning expenditure. A tax announcement remains distinct, however, from legislative implementation and investment actually carried out. [2]

Finance Canada projects a marginal effective tax rate on new investment of 6.4%, down from 13.0%. This comparative indicator is not the statutory income tax rate. [1]

Industry support, results still to measure

Canada’s mechanical and electrical contractor associations welcome a permanent arrangement covering more equipment and technology. Their response highlights the importance of predictability for construction. This is the perspective of sectors that may benefit from the policy, rather than an independent assessment of its returns. [3]

The Mining Association of British Columbia emphasizes the capital requirements of mining projects and the delay between initial expenditure and revenue. Its support illustrates the issues facing businesses in which equipment and infrastructure require a substantial financial commitment. [4]

Assessing the policy will require separating three things: the rules ultimately adopted, additional investment attributable to the incentive and tax revenue Ottawa forgoes. The economic forecasts accompanying the announcement describe expected effects; they are not yet observed results. [2]