Canada's tax code gets biggest overhaul in 50 years with productivity deduction

The federal government announced what it describes as one of the most significant changes to Canada's business tax system in half a century: the Productivity Mega Deduction.

Announced October 9 by Lena Metlege Diab, Minister of Immigration, Refugees and Citizenship, the measure allows businesses to immediately deduct the full cost of a broader range of investments. Eligible assets for immediate expensing expand from roughly 15 per cent to more than 65 per cent of asset categories, newly including fibre-optic cables, greenhouses, mining property, oil and gas pipelines, software, research and development, computer equipment, aircraft and vehicles, patents, rail track, bridges and roads.

Immediate expensing is made permanent under the plan. The marginal effective tax rate on new business investment falls from roughly 13 per cent to 6.4 per cent—a rate the government claims is the lowest of any major economy in the world and less than half the U.S. rate.

François-Philippe Champagne, Minister of Finance and National Revenue, called it "a game changer for investment in this country" and claimed it "reinforces Canada's position as the most competitive country in the G7 for new business investments and setting the conditions for an investment supercycle."

Metlege Diab framed the deduction as part of a broader economic strategy aimed at workers and communities. "In every community, we want Canadians to see the benefits of a stronger, more productive economy. That means more opportunities for workers, stronger local businesses, and a country where skilled newcomers and Canadians can build a future together."

No implementation date, fiscal cost estimate, or timeline for when changes take effect was provided in the announcement.