Canada's New 'Productivity Mega Deduction' Aims to Outpace Trump Tax Cuts

Canada unveiled a sweeping tax deduction on Tuesday, expanding a capital-investment break that Prime Minister Mark Carney says will make the country the cheapest place in the developed world to build. The move builds on last year’s productivity super-deduction and now covers a far broader swath of the economy. • iShares MSCI Canada Index Fund stock is trading at elevated levels. Where is EWC stock headed? A Bigger Write-Off Officials are calling the expanded measure the "Productivity Mega Deduction" and it lets companies immediately write off the full cost of new capital investments in the year those assets enter service. The tax break previously applied to roughly 15% of capital spending, concentrated in manufacturing. The new version stretches coverage past 65% of capital spending, folding in energy, mining, telecom infrastructure and more. Carney delivered the announcement at Canada’s first-ever investment summit in Toronto, where he is seeking to catalyze nearly C$1 trillion in total investment over five years. Read Also: Mark Carney Rules Out EU Membership for Canada, Seeks ‘Unique Alliance’ as Trump Trade War Escalates Trade tensions with the U.S. loom over the effort and tariffs on Canadian exports have squeezed several industries, adding urgency to Ottawa’s push for tax competitiveness. The government frames the change as one of the most significant amendments to business tax policy in roughly 50 years, according to the Wall Street Journal. Carney argued the deduction gives Canada a lasting edge over rivals, including the U.S. following President Donald Trump‘s tax overhaul. ‘Your Dollars Will Go Further’ “Your investment dollars will go a lot further in Canada than anywhere else in the advanced world,” Carney told the summit audience. Figures released alongside the announcement show Canada’s marginal effective tax rate on new investment falling sharply, undercutting both the U.S. rate and the broader average among Organization for Economic Co-operation and Development members. Government estimates put the added fiscal cost near C$36 billion ($25.67 billion) over five years, starting with the 2026-27 budget year. Officials project the deduction could lift annual economic output by roughly C$22 billion ($15.93 billion) once fully phased in. See More: Top Growth Stocks Separately, Reuters reported Finance Minister François-Philippe Champagne moved to speed up advance tax rulings for investors committing C$1 billion ($720.70 million) or more, giving large backers earlier certainty before committing capital. Whether the incentive translates into sustained capital flows remains uncertain. Productivity growth in Canada has lagged for years, and skepticism persists over how quickly companies will act on the new write-off. Even so, the scale of Tuesday’s announcement marks a shift in how aggressively Ottawa is courting private capital amid a fraught trade relationship with Washington. Investors can look at the iShares MSCI Canada ETF (NYSE:EWC), which tracks broad Canadian equities, for the most direct way U.S.-listed play to express a view on this policy news. Read Also: These 10 Stocks Are Squeeze Candidates Waiting to Happen Image: Shutterstock