Canada is cranking up immediate expensing to push businesses to invest sooner. The "productivity mega deduction" lets companies write off a much broader set of capital purchases right away instead of stretching deductions over years. Carney put the motivation bluntly: "We have had a productivity issue in this country," and, "We need more investment in machinery, equipment, intangibles, R&D."
By letting firms cut their tax bill upfront - or carry the deduction forward - the policy is designed to pull forward investment plans. Carney said eligibility rises to about two-thirds of asset types, from 15%. It is one of the biggest changes in decades to Canada's tax treatment of business investment.
Eligible spending now spans mining assets; infrastructure such as pipelines for oil and gas; equipment used in oil production; plus computer hardware, aircraft, Canadian-made passenger vehicles, fiber-optic cables, bridges, roads, and other categories. The measure is permanent, requires legislation, and it takes effect for purchases made on or after Sept. 15. OBBBA refers to One Big Beautiful Bill Act.
This builds on a 2025 budget step that confined immediate expensing to a smaller group of assets - for example, manufacturing buildings and zero-emission vehicles - with that relief scheduled to wind down by 2034. In the spring, policymakers broadened eligibility to include liquefied natural gas equipment, originally linked to carbon-pricing rules. The government says those emissions-intensity criteria are now removed.
Ottawa pegs the cost at C$36 billion over the next five years and expects an economic return between 1.4 and 3 times the federal outlay, including C$22 billion in additional output annually and anticipates adding 80,000 jobs annually a decade from now.
Canadian Imperial Bank of Commerce chief economist Avery Shenfeld said, "This very much fits in with what Canada's overall strategy is, which is to drive investment in sectors where we can export our products to the world." He added, "It makes perfect sense that we're taking a tax measure that originally was much more restricted to parts of manufacturing and broadening it to sectors like mining and technology."
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For years, business spending has been soft, and the Bank of Canada has deemed the weakness in productivity to be an emergency. Deputy Governor Nicolas Vincent warned last year about a "vicious circle" in which low productivity leads to lower investment. Carney's government is trying to break that loop, pledging to mobilize C$1 trillion in public and private investment over five years, announcing billions for pipelines and other infrastructure, and offering support to sectors hit by the trade war.
Fiscal questions linger. Over half of economists in a recent Bloomberg survey expect deeper deficits, even with stronger energy revenues. Carney says the operating budget will still balance, with new spending treated as capital because it spurs investment.
"We're moving to the lowest deficit in the G7," he said. The April fiscal plan projected C$242 billion in deficits over four years, with another budget coming in the months ahead.
For everyday investors, bigger and faster write-offs can shift where companies deploy capital, and how quickly. Previous federal efforts were often temporary or narrowly focused - Justin Trudeau's government, for example, targeted clean technologies and certain property bought by small businesses. This time, the net is wider and intended to influence real-world spending across more sectors.
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