OTTAWA — The federal government is rolling out a suite of tax measures intended to help Canada compete with the allure of sweeping business-friendly tax reforms in the United States, while also trying to help Canadian businesses access export markets elsewhere in the world.

“To boost productivity and attract investment, this new government is introducing a Productivity Super-Deduction—a set of enhanced tax incentives covering all new capital investment that allows businesses to write off a larger share of the cost of these investments right away,” the Department of Finance wrote in the federal budget document released Tuesday.

It includes a promise to move ahead with expanding and accelerating capital cost allowances (CCAs), which is the tax-code system that determines how and when companies can write off investments. The Liberal government under then-prime minister Justin Trudeau first promised those changes last year, which included delaying the phase-out period for the Accelerated Investment Incentive, a tax benefit that gives businesses an enhanced first-year write-off for most capital assets. It did not roll them out before Trudeau stepped down and Prime Minister Mark Carney triggered an election earlier this year. 

The budget also introduces a new accelerated CCA: immediate expensing for any newly acquired buildings intended for manufacturing or processing goods for sale or lease. This means that until 2030, a company will be able to claim a 100 per cent deduction for any building it buys to use for manufacturing or processing in the first taxation year the property is used for that purpose. The government plans to phase the tax benefit out over four years ending in 2033. The budget said it would cost nearly $1.2 billion over five years, including $45 million this year.

The budget also proposes to bring back accelerated CCAs for liquefied natural gas (LNG) equipment and related buildings that expired at the end of 2024, with a key change. Eligibility for the new version of the tax break will depend on whether the facilities meet emissions performance requirements, which the government has yet to announce. Those in the top 25 per cent of emissions performance would be eligible for the rate of 30 per cent for liquefaction equipment and 10 per cent for non-residential buildings used in LNG facilities–the same as the previous measure. Those in the top 10 per cent would see the capital cost allowance rate for liquefaction equipment climb to 50 per cent. This would cost $325 million over five years, according to the budget. 

As The Logic reported last week, Canadian businesses across a variety of sectors had been hoping to see such tax breaks on machines and equipment to help boost investment as well as contend with the impact of the trade war launched by U.S. President Donald Trump. Since Canada’s corporate tax rates are linked to profits, letting businesses deduct those expenses right away, and all at once, also means reducing the total amount of taxes they have to pay.

There is another reason: the Trump administration recently made permanent its own version of accelerated write-offs in its One Big Beautiful Bill Act. The Canadian government’s budget document framed the tax incentives it contained as a response to that legislation, saying they would lower Canada’s marginal effective tax rate from 15.6 per cent to 13.2 per cent—making it the lowest in the G7. This will strengthen Canada’s “competitiveness with the U.S. following measures implemented in the One Big Beautiful Bill Act,” the budget document said.

The Canadian Chamber of Commerce has asked the Senate finance committee to study the impacts of the U.S. legislation, arguing it is a bigger threat to Canada’s economy than the trade war. “We are all very concerned about the real and immediate impact of United States tariffs. That said, the changes made to the U.S. corporate tax and investment framework potentially represent an even greater medium to long-term risk to Canadian business,” Matthew Holmes, executive vice-president and chief of public policy at the Chamber, wrote in a letter to the committee chair.

Charles St-Arnaud, chief economist at Alberta Central, said the tax incentive for manufacturing and processing facilities can both spur investment and help out a struggling sector. “A lot of it is to create the same level playing field with the U.S., where they’ve had a lot of tax credit on those specific investments,” he said, but it can also give the manufacturing sector some relief. “It’s a sector that we know is being very much affected by the tariffs.” St-Arnaud also said it is unclear whether taxes are to blame for the sector’s struggles—or whether cutting them would reverse that trend. “The tax rate is always just one part of the decision when you do an investment.”

Though the budget comes amid a trade war with the U.S., much of Canada’s response—including support for sectors hit hard by the tariffs, such as steel, aluminum, autos and forestry—has already been announced. 

Other trade-related measures looked ahead. Carney pledged last month to double Canada’s exports to non-U.S. markets within the next decade to bring in an extra $300 billion in trade. Tuesday’s budget contained some measures to help the government and Canadian businesses get there. This begins at home, with $5 billion over seven years beginning this year for a Trade Diversification Corridors Fund at Transport Canada to support projects meant to improve the movement of goods within Canada and to international markets. The government said, as an example, this could include supporting a second wharf at the Port of Saguenay in northeastern Quebec or rail lines in Alberta. The budget also promised $159 million over three years for a number of trade-financing programs to help companies with everything from going to trade shows to securing international partnerships.