Government of Canada Proposes Productivity Mega Deduction for Capital Costs
What happened
The Government of Canada announced a proposed permanent Productivity Mega Deduction on September 15, 2026, during the Canada Investment Summit. This deduction would allow taxpayers to immediately deduct 100% of the cost of eligible depreciable capital property and eligible Canadian development expenses (CDEs) incurred on or after that date. Draft legislative proposals were released alongside a backgrounder, but there is no assurance that they will be enacted. The Canada Revenue Agency will prioritize advance income tax rulings for investments of C$1 billion or more in Canada.
Why it matters
The proposal changes how businesses can claim tax deductions for capital investments and development costs. This mechanism aims to incentivize investment in depreciable property and Canadian development expenses. The Parliamentary Budget Officer might need to update its fiscal cost predictions due to the potential change in tax revenue.
Who's involved
- Government of CanadaAnnounced the proposed Productivity Mega Deduction.
- Canada Revenue AgencyWill prioritize advance income tax rulings for large investments in Canada.
- Parliamentary Budget OfficerIs responsible for updating fiscal cost predictions related to the tax changes.
Who could feel it
Possible knock-on effectsThese are possibilities Brind reasoned out, not predictions, and not advice. Most are not stated in any report.
- Parliamentary Budget OfficerSpeculative
Could need to update its fiscal cost predictions regarding changes in tax revenue.
Keep exploring
The entities involved
-
Canada Revenue Agency
Canadian tax collection agency