Which businesses gain most from the Productivity Mega Deduction
Finance Canada’s own figures show the tax on new investment falling furthest in trucking and farming and barely moving in retail. What each kind of business spends its capital on explains the difference.
Transportation and storage gains most: Finance Canada puts its tax rate on new investment at minus 2.3 percent, down from 13.3. Agriculture and fishing falls to minus 6.0 from 7.6. Retail, wholesale and manufacturing barely move, because their capital sits in inventory, land and buildings or already had immediate expensing. The earnings a business is valued on stay the same.
The measure behind the headline
The marginal effective tax rate is the share of the return on one more dollar of new investment that goes to tax, after the corporate rate and the deductions and credits that come with the investment. It describes a typical new investment. A real company’s tax bill depends on what it actually buys and earns.
Finance Canada published the rate by sector in its backgrounder on the Productivity Mega Deduction on September 15, 2026. The national figure falls from 13.0 percent to 6.4 percent. Underneath it, the fall ranges from under a point to more than fifteen.
| Sector | Before, percent | After, percent | United States, percent |
|---|---|---|---|
| Transportation and storage | 13.3 | −2.3 | 8.6 |
| Agriculture and fishing | 7.6 | −6.0 | 7.2 |
| Forestry | 9.5 | 1.8 | 19.7 |
| Utilities | 13.4 | 7.1 | 16.0 |
| Services | 15.6 | 9.9 | 26.3 |
| Construction | 18.3 | 13.0 | 22.2 |
| Wholesale trade | 21.3 | 18.6 | 22.7 |
| Retail trade | 21.6 | 19.3 | 23.3 |
| Manufacturing and processing | −0.4 | −1.2 | 11.1 |
Before is the rate after the Spring Economic Update 2026. After adds the Productivity Mega Deduction alone, so the whole difference in each row is the deduction. A negative rate means the deductions and credits on a new investment are worth more than the tax on what it earns.
The last column is Finance’s estimate for the United States in 2026. With the deduction, every Canadian sector in the table sits below its American counterpart. What the deduction covers and when it starts is set out in the explainer on the Productivity Mega Deduction.
Why trucking and farming move most
The deduction applies to depreciable property, and these businesses spend most of their capital on it. A trucking company’s money goes into trucks and trailers, while farms and fishing operations buy machinery, boats and gear. Nearly all of it now qualifies.
Before, those assets were written off over many years. Moving the whole deduction into the first year takes transportation and storage from 13.3 percent to below zero, the largest fall in the table.
Why manufacturing barely moves
Manufacturers had most of this already. Budget 2025 gave immediate expensing to manufacturing and processing machinery and to manufacturing buildings, so the sector’s rate was below zero before September 15. The Mega Deduction adds the rest of their equipment and software, and the rate moves by less than a point.
Why retail and wholesale barely move
A store or a distributor ties up much of its capital in inventory, land and buildings. Inventory is deducted as it is sold, and land keeps its full cost on the books until it is sold. Buildings in classes 1 and 3 are excluded from the Mega Deduction.
What does qualify, the forklifts and the point of sale systems, is a smaller part of the total. Retail and wholesale finish with the highest rates in the table, as they started.
Services and construction sit between
A professional firm’s capital is mostly computers, software, furniture and the fit out of leased premises. Computers were already expensed under Budget 2025. The rest now joins them, which takes services from 15.6 percent to 9.9.
Construction companies own heavy equipment, which qualifies. They also hold land, buildings and working capital, which the measure excludes, so their rate falls by about five points and stays above the national average.
What it does to what a business is worth
The number a buyer multiplies stays where it was. A small business is priced on seller’s discretionary earnings and a larger one on EBITDA, earnings before interest, tax, depreciation and amortization. Both are measured before depreciation and tax, so a faster write off leaves them unchanged.
The change shows up in cash. A buyer models the years after closing, including what must be spent to keep the business running, such as the truck due for replacement in year two. In the sectors where the rate fell most, that spending now costs less after tax, and the buyer keeps more of the cash the business produces in those years.
How much of that buyers pay for is something the market settles over time. The benefit is one of timing: an asset’s total deduction over its life is the same, and it arrives sooner. A free valuation on adjusted earnings shows what the earnings themselves support today.
Sole proprietors and partnerships
The draft rules limit how individuals, and partnerships with individual members, can use the deduction to create or increase a loss. Their immediate deduction is capped at the income the business earns that year.
Take, as an illustration, a sole proprietor who buys a $150,000 truck in a year with $80,000 of business income. The immediate deduction stops at that $80,000. The other $70,000 stays in the asset’s class and is deducted under the normal rules in later years.
Corporations are outside the restriction. An owner planning a large equipment purchase as a sole proprietor should raise that difference with an accountant before buying.
Reading the table for your own business
The sector figures are averages over what each industry buys. A consulting firm that runs a fleet of service vans sits closer to transportation than to services. So does an HVAC or plumbing company with a dozen trucks on the road. A trucking company that owns its terminals carries more excluded property than the average.
The useful figure for an owner is the share of the business’s capital spending that goes on equipment, vehicles and software. That share is what the deduction reaches. In a sale of assets it also sets how much the deduction is worth to a buyer, as the piece on asset sales under the Productivity Mega Deduction works through.
Questions owners ask
- Which industries benefit most from the Productivity Mega Deduction?
- On Finance Canada’s figures, transportation and storage, where the marginal effective tax rate on new investment falls from 13.3 percent to minus 2.3 percent, and agriculture and fishing, from 7.6 percent to minus 6.0 percent. Forestry and utilities follow. Retail, wholesale and manufacturing move least.
- Does the Productivity Mega Deduction make my business worth more?
- The earnings a buyer multiplies stay the same, because they are measured before depreciation and tax. The deduction lowers the after tax cost of the equipment a buyer will need to replace. That matters most in capital heavy businesses, and a buyer may weigh it in the cash flow it models.
- Can a sole proprietor use the Productivity Mega Deduction?
- A sole proprietor can take the immediate deduction up to the income the business earns that year, and the same cap applies to partnerships with individual members. The rest of the cost stays in the asset’s class and is deducted under the normal capital cost allowance rules.