Canada Slashes Business Investment Tax Rate to 6.4%, Lowest in G7

Canada is making an aggressive pitch for global capital. Prime Minister Mark Carney unveiled a new Productivity Mega Deduction that cuts the country’s marginal effective tax rate (METR) from 13.0% to 6.4%, after Budget 2025 measures had already brought it down from 15.4%.

By comparison, as of 2026 the U.S. METR sits at 16.9% and the OECD average is 19.0%. That gap is the story for cross-border capex decisions heading into 2027.

What the Productivity Mega Deduction actually does

The measure provides immediate expensing for a broad-based range of depreciable property on a permanent basis, letting taxpayers fully write off the cost of an investment in the year it becomes available for use.

The change builds on Budget 2025’s accelerated-depreciation measures and takes effect right away, with Bloomberg reporting the tax break extends to a broad range of investments including pipelines.

Why Ottawa is doing this now

Canada says it is leveraging its strengths to catalyse $1 trillion of new investment. The announcement came alongside the first Canada Investment Summit, which the government says helped unleash nearly $500 billion of new investment commitments.

Carney also announced Canada will seek private investment through long-term concessions to operate the country’s four largest airports, with the federal government retaining ownership of the underlying land and assets while bringing in new private capital.

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The cross-border angle

The 6.4% METR is roughly a third of the U.S. rate. For capital-intensive sectors — energy, pipelines, mining, manufacturing, data centers — that changes the math on where to site the next dollar of capex.

Ottawa argues that with the Productivity Mega Deduction, Canada is more tax competitive than the U.S. across all major sectors of the economy. Expect U.S. industry groups to use this as ammunition in the next round of corporate tax debates.

Options market and stocks to watch

Watch for reactions across Canada-exposed and cross-border names:

• ENB: Enbridge is a direct pipeline beneficiary given the expensing scope reportedly includes pipelines.
• TRP: TC Energy sits in the same bucket, with heavy Canadian capex plans.
• CNQ: Canadian Natural Resources runs one of the largest capex programs in Canadian energy.
• SU: Suncor could see improved after-tax returns on new oil sands and refining investment.
• RIO: Rio Tinto and other miners with Canadian critical minerals exposure may reassess project economics.

Watch for more coverage on tax and macro shifts in other news.

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