Canada Launches Productivity Mega Deduction to Slash Business Taxes

The Government of Canada introduced the Productivity Mega Deduction on October 1, 2026, marking one of the most significant overhauls to the nation's business tax system in 50 years. The initiative is designed to stimulate investment and growth by expanding the range of assets eligible for immediate expensing from approximately 15% to over 65%.

Eligible investments now include software, research and development, computer equipment, fibre-optic cable, mining property, and infrastructure such as roads and bridges. To provide long-term certainty for investors, the federal government has made immediate expensing permanent.

These measures are projected to lower the marginal effective tax rate on new business investment from roughly 13% to 6.4%. Government officials claim this is the lowest rate among major global economies and represents less than half the rate currently found in the United States.