Carney’s investment pitch raises a $36-billion question for taxpayers
By Romel Dhalla
Mark has gone Mega. At Toronto’s Canada Investment Summit, the prime minister assembled a crowd of some of the world’s biggest investment managers and unveiled the Productivity Mega Deduction. Yes, you read that right. It is a Mega deduction. We already had a Productivity Super-Deduction, so at least there has been growth in the branding if not in the economy.
The proposal would allow businesses to deduct the full cost of a much wider range of eligible investments in the year they become available for use, rather than claiming those deductions over time. It covers everything from computer equipment and software to eligible mining assets, pipelines and transportation infrastructure. Canadian businesses can use it, as can foreign-owned businesses investing here. Ottawa estimates that it would reduce the effective tax burden on new business investment from roughly 13 per cent to 6.4 per cent. The commercial objective is to make projects more attractive after tax and encourage businesses to undertake investments they otherwise would not make.
The real question is whether this is going to be enough. Canada’s productivity problem did not arrive yesterday. By 2022, our economy was producing only about 71 per cent of the value generated per hour worked in the United States, down from 88 per cent in 1984. Anyone committing capital for several decades will look beyond the deduction to permitting, approvals, operating costs and the reliability of future cash flows. A project can look attractive after tax and still be impossible to finance if nobody knows when construction can begin.
Ottawa has separately announced that investments of at least $1 billion will receive priority for advance tax rulings.
That distinction is important. The deduction is broadly available, while the priority service is explicitly directed at large investments. Smaller businesses will still need to understand how the rules apply to them, without necessarily having an institutional investor’s tax department to work through the details.
There is also the matter of getting permission to build. Depending on the project, Canada’s approval process can involve various environmental assessments and provincial permits.
Ottawa’s climate-assessment framework also requires covered projects operating beyond 2050 to provide a credible plan to achieve net-zero emissions by that year.
Carney himself championed net-zero finances and helped launch the Net-Zero Banking Alliance in 2021. By October 2025, major financial institutions had withdrawn, and the alliance had shut down, barely four and a half years after its launch.
Given this track record, investors committing money for decades rightly need to know which financing commitments will hold, what compliance will cost and when construction can begin. A Mega deduction is not a construction permit.
Investment returns provide another reality check. From the beginning of 2021 through the end of 2025, the iShares Global Clean Energy fund lost approximately 37 per cent, despite a substantial recovery in 2025. Over those same five calendar years, the iShares Core S&P 500 fund gained approximately 96 per cent.
Both figures are in U.S. dollars and include reinvested distributions. One global sector fund does not represent every green investment, and the two funds hold very different businesses.
Nevertheless, someone who invested $10,000 in the clean-energy fund would have finished with roughly $6,300, compared with $19,600 in the S&P 500 fund. For someone saving for retirement, that $13,300 gap is real money.
Point being that “green” investments have a reputation for poor performance, and Canada’s environmental framework is like a wet blanket for investments that could seek infrastructure opportunities in other countries.
However, Carney says major-project reviews can become faster without lowering standards. Investors will need to see how that works in the actual approvals.
Environmental conditions, Indigenous participation and construction schedules all have financial implications that must be reflected in project agreements. Who bears the cost of a delay? What obligations remain with the investor, and what risks does the public retain? The deduction changes the tax calculation; it does not answer those questions.
The proposed airport arrangements illustrate why the wording matters. Ottawa is seeking private investment through long-term operating concessions at four major airports while retaining ownership of the underlying land and assets. I question why this is needed, or how it fits in.
The financial questions concern the concession terms, responsibility for future investment, charges paid by travellers and any guarantees provided by taxpayers. What additional or measurable productivity improvements will these concession agreements actually bring and how is this “Mega”?
Then there is the financial burden of the government’s own bill. Ottawa estimates the Mega Deduction’s additional fiscal cost at $36 billion over five years. Accelerating a deduction is not the same thing as handing an investor a cheque for the cost of a project, but it does reduce government revenue in the near term. The fiscal case depends on how much additional investment and economic activity the measure actually generates. Money spent on a project that would have proceeded anyway cannot be counted as entirely new investment created by the deduction.
Should the resulting growth fall short of expectations, the revenue difference would have to be accommodated through borrowing, other revenues or changes in spending. Additional debt also carries financing costs. Whether the programme ultimately puts pressure on taxes or government borrowing costs depends on its results and the wider economic environment. Those are risks worth a closer look, because if the promised growth fails to materialize, the fiscal case for the policy weakens considerably.
There is also the question of who benefits. Investment gains can reach ordinary Canadians through pension funds and retirement savings, but that does not tell us what happens to households with little invested capital. Their gains would have to come through employment, higher wages, greater purchasing power or better public services.
I question how Mega deductions, layered onto Canada’s regulatory framework and potentially available even for qualifying purchases of used assets, will materially improve the lives of average Canadians. If the promised investment and productivity gains actually arrive, perhaps they will. If they do not, Canada could end up offering investors very generous terms while taxpayers absorb much of the fiscal cost. In other words, the investors get the Mega deduction, while Canadians risk getting a Mega tax bill.
As for my Brookfield Infrastructure shares, I intend to hold onto them and may add to the position depending on how the policy shakes out. That is my attempt to Mega myself. But I will also be watching the taxpayer’s bill, because I own a share of that one too.
Romel Dhalla, is President of Dhalla Advisory Corp., provides strategic corporate finance advice to companies and high net worth individuals. He was a portfolio manager and investment advisor with two major Canadian banks for 17 years. Contact him at romel@dacorp.ca. Any views or opinions represented in this article are personal and belong solely to the author and do not represent those of people, institutions or organizations that the author may or may not be associated with in professional or personal capacity, unless explicitly stated. Any views or opinions are not intended to malign any religion, ethnic group, club, organization, company, or individual.