Canada Looks to Lure New Investment With Aggressive, Broad Tax Writeoff Terms — Update

By Robb M. Stewart and Paul Vieira

Canada is implementing a tax change tied to the accelerated write off of capital equipment that attempts to move the country toward Prime Minister Mark Carney's goal of attracting nearly $1 trillion of new investment.

Lobbying groups for Canadian companies applauded the decision and said it could set the stage for an investment renaissance. Economists and public-policy analysts dubbed this the most substantial change to Canada's tax code in decades, and helps Canada compete following President Trump's tax revamp introduced last year.

Carney's announcement on Tuesday is aimed at strengthening Canada's tax competitiveness and encouraging investment at a time when Canada is confronted with a toughened trade environment and hefty tariffs on key exports to the U.S. Officials said the proposed change will improve productivity and strengthen the economy.

Dubbed the productivity-mega deduction, the government said it will allow for the immediate expensing of a broad-based range of depreciable property on a permanent basis. This would allow businesses 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 an investment summit in Toronto, where he hopes to match some of the world's biggest investors with Canadian companies pitching shovel-ready projects.

The big change, analysts said, is that officials are expanding the types of assets eligible for the accelerated writeoff. The writeoff was previously limited to assets in the manufacturing sector. That deduction can now be applied more broadly, to the energy and mining sectors and broadband for instance, thereby covering about two-thirds of all capital investment, officials said.

"This is a measure that helps address the single largest economic challenge Canada faces currently--productivity," said Trevor Tombe, an economics professor at the University of Calgary, adding business investment is the most important driver of productivity. Levels of productivity and business investment have been so lackluster that it prompted a senior Bank of Canada official in 2024 to declare the economic challenges a national emergency.

Carney said the expensing changes will position Canada as a tax-competitive leader for new investment, by offering the lowest marginal effective tax rate among Group of Seven nations. In charts accompanying his announcement, Carney said Canada's marginal effective tax rate--or the level of taxation from all levels of government on every additional dollar of capital spending--will now be less than half the U.S. rate, and roughly one-third of the average for Organization for Economic Co-operation and Development countries.

"We are making it cheaper to invest," the prime minister said. At a press conference, he said the government needed to offer immediate incentives to investors to accomplish its goal of building new trade corridors and resource projects that are necessary to restore economic resiliency.

"We need a clear advantage. We have a clear advantage now," Carney said.

Business Council of Canada chief executive Goldy Hyder said his group was pushing for such a move to be included in the government's upcoming 2026 budget plan. The measure "will help catalyze investment in Canada's capital infrastructure," said Hyder, who represents CEOs from the country's biggest corporations.

Candace Laing, head of Canadian Chamber of Commerce, said she expects the measure to "unlock investment and create jobs...The permanency of this deduction at these levels will draw the attention and interest of investors in Canada for longer than any investment summit could last."

The government estimates the incremental cost of the measure to be about C$36 billion, about $25.67 billion U.S., across five years from the 2026-27 fiscal year. Officials estimate the tax change could increase economic output by C$22 billion annually.

Write to Robb M. Stewart at robb.stewart@wsj.com and to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

September 15, 2026 14:59 ET (18:59 GMT)