By Robb M. Stewart Canada's government plans to make it more attractive for businesses to invest in the country with a change that would lower the effective tax rate by allowing for immediate expensing of money spent on most new assets. The effort unveiled Tuesday by Prime Minister Mark Carney is aimed at strengthening Canada's tax competitiveness and encouraging investment at a time when Canada is confronted with toughened trade environment and tariffs on exports to the U.S. The proposed change will improve productivity and strengthen the economy with what his government describes as one of the most-significant changes to Canada's business tax system in half a century, Dubbed the productivity mega deduction, the government said it will allow for immediate expensing for a broad-based range of depreciable property on a permanent basis.

This would allow taxpayers to fully write off the cost of an investment in the year that it becomes available for use. "Simply, your investment dollars will go a lot further in Canada than anywhere else in the advanced world," Carney told an audience at a summit in Toronto where he hopes to match some of the world's biggest investors with companies and development projects in the country. The policy proposes covering more than four times the capital assets previously eligible for immediate expensing.

The push aims to lower the cost of capital, strengthen the business case for modernizing equipment, and encourage companies to spend and expand in Canada. Broadly, the amount of assets covered in the tax incentive will rise to more than 65% from about 15%, including fiber-optic cable, mining property, oil and gas pipelines, software, research and development, computer equipment, aircraft, and other assets. The government estimates the incremental cost of the measure to be about C$36 billion, the equivalent of US$25.9 billion, over five years from the 2026-27 fiscal year.

Targeting new investment decisions is a central part of Ottawa's effort to catalyze an additional C$1 trillion in investment in Canada, an investment supercycle the government hopes spurs wide-ranging economic benefits. "Canada has what the world wants. We're an energy superpower with the most-educated workforce in the world and rock-solid fiscal strength," Carney said.