The federal government has unveiled a major new business tax incentive worth an estimated $36 billion over five years, as Prime Minister Mark Carney attempts to attract substantially more private investment to Canada and reverse years of weak business spending.
Announced during the Canada Investment Summit in Toronto, the new “productivity mega deduction” expands the range of capital assets that businesses can immediately expense. Companies will be able to deduct the full cost of qualifying investments in the year they are made rather than spreading those deductions over several years.
Ottawa says the measure will significantly improve Canada’s tax competitiveness for new investment. According to the federal government, the changes will reduce the marginal effective tax rate on new investment from approximately 13 per cent to 6.4 per cent, which it says would be the lowest among major economies.
The announcement comes as the Carney government pursues an ambitious goal of attracting $1 trillion in new investment over five years. Hundreds of executives, institutional investors and global asset managers have gathered in Toronto for Canada’s first national Investment Summit, where federal ministers and provincial premiers are promoting opportunities in sectors including energy, critical minerals and defence.
Carney also announced at the summit that private investors will be permitted to invest in Canadian airports, opening another area of major infrastructure to private capital as Ottawa seeks new sources of financing for economic expansion.
The government is simultaneously moving to provide greater tax certainty for exceptionally large projects. Companies considering Canadian investments worth at least $1 billion will receive priority access to the Canada Revenue Agency’s existing Advance Income Tax Rulings program.
Through the program, the CRA can issue a binding determination explaining how Canadian income tax law would apply to a proposed transaction before a company commits its capital. Ottawa hopes faster access to those decisions will reduce uncertainty for investors considering multibillion-dollar projects.
Finance Minister François-Philippe Champagne said certainty is particularly important when companies are deciding whether to proceed with major investments, positioning the accelerated rulings as another tool for making Canada more attractive to international capital.
The measures represent a central part of the Carney government’s effort to improve Canada’s investment climate. Rather than relying solely on individual subsidies or project-specific incentives, Ottawa is attempting to change the broader tax treatment of capital investment while giving the largest investors greater certainty before committing funds.
However, the tax changes do not address every obstacle facing major Canadian projects. Analysts have argued that taxation is only one part of the investment equation, with regulatory uncertainty, permitting timelines and the ability to move large infrastructure and resource projects from announcement to construction remaining important considerations.
The success of the government’s strategy will therefore depend not only on whether companies respond to the new deductions, but also on whether Ottawa can translate the investment commitments being promoted at the Toronto summit into projects that are ultimately financed, approved and built.
For Carney, the summit and the new tax measures form part of a broader economic strategy: make Canada more competitive for global capital, accelerate major investment decisions and ultimately lift productivity at a time when the country is seeking to diversify its economy and strengthen its long-term growth.
