Until about 10 years ago, I often wrote positive columns about Canadian policy. I praised our northern neighbors for spending restraint, corporate tax reform, bank bailout policy, regulatory budgeting, the tax treatment of saving, and private air traffic control.

Unfortunately, Canada then became more statist under Justin Trudeau.

And I assumed that Mark Carney, who took over as Prime Minister in 2025, would be similarly bad (especially since he had a track record of failure at the Bank of England).

Yet look at this chart just released by the Canadian government. A chart that brags about moving to a lower-rate, more-competitive tax system.

The chart comes from this release.

Carney’s government is shifting from depreciation to expensing. Here are some excerpts.

To boost business investment, enhance certainty and simplicity for businesses, and strengthen Canada’s tax competitiveness, the Government of Canada proposes to implement the Productivity Mega Deduction, which will provide immediate expensing for a broad-based range of depreciable property on a permanent basis. Immediate expensing allows taxpayers to fully write off the cost of an investment in the year that it becomes available for use. This powerful investment incentive will create the conditions for an extended period of higher investment—a Canadian investment supercycle. This measure builds on the Productivity Super-Deduction announced in Budget 2025, which provides immediate expensing to about 15 per cent of investment in capital assets, including machinery, equipment, and buildings used for manufacturing and processing, clean energy generation and energy conservation equipment, zero-emission vehicles, patents, data network infrastructure, and computers. The Productivity Mega Deduction would permanently provide immediate expensing to a much wider range of assets and expenses (i.e., about two-thirds of investment in capital assets would be eligible).

The Tax Foundation is impressed by Canada’s reform.

Here are some excerpts from analysis by Alex Mengden and Cristina Enache.

Canada’s Minister of Finance and National Revenue François‑Philippe Champagne announced that full expensing for machinery, equipment, and patent rights will be made permanent. This is good news for capital investment in Canada since permanence gives investors a reliable expectation of low cost of capital and reduces the tax bias against long-term investments. …In international comparison, the government’s proposal for full expensing permanence would lift Canada’s capital cost recovery up to 4^th best among all 38 OECD countries instead of dropping back to 7^th after the United States’ temporary full expensing provisions for industrial buildings phase out between 2028 and 2030. For 2026 to 2029, before phasing out its own full expensing for manufacturing and processing buildings, Canada will have the best capital cost recovery in the OECD, together with Estonia and Latvia. …When viewed through the lens of the International Tax Competitiveness Index 2025 (ITCI), the reform largely consolidates Canada’s recently improved position over time. Among the 38 OECD countries in the Index, the temporary expensing provisions of the 2025 budget, if approved in their totality, would lift Canada’s corporate rank up by eight spots, from 22^nd to 14^th.

Here’s a chart from the Tax Foundation report.

In an ideal world, the yellow line would stay at 100, which would mean no tax bias against new investment.

But I try not to make the perfect the enemy of the good. Canada deserves praise for doing something that will lead to more investment (which, in turn, will lead to higher productivity and higher wages).

P.S. Trump’s “One Big Beautiful Bill” moved U.S. policy in the right direction on depreciation/expensing.

P.P.S. Full expensing would be the norm if countries adopted the flat tax.