The federal government says a new tax incentive could help Canadian businesses invest in equipment, technology and expansion at a time when companies are facing uncertainty over Canada’s trading relationship with the United States.
Secretary of State for Labour John Zerucelli was in Barrie on Tuesday, visiting JEBCO Industries to highlight the new Productivity Mega Deduction.
The government says the measure would allow businesses to immediately deduct the full cost of a much broader range of investments in the year the assets become available for use.
That would expand immediate expensing from roughly 15 per cent of capital assets to about two-thirds of investment in capital assets. The government estimates the measure would reduce Canada’s marginal effective tax rate on new business investment to 6.4 per cent, compared with 16.9 per cent in the United States.
Zerucelli used JEBCO as an example of the type of Canadian company the government wants to encourage to invest and grow.
“Let's take JEBCO,” he said. “Let's say JEBCO buys a new one-million-dollar piece of eligible equipment and puts it to work. You can now deduct the full $1 million in the first year.”
Rather than spreading that deduction over several years, Zerucelli said businesses would get the benefit immediately.
“So, when you're deciding whether to buy a new machine, add another robotics system, develop the next UltraClad, or expand your operation here in Barrie, it costs less to make that investment,” he said.
JEBCO is a Barrie manufacturer of heavy industrial equipment and components, serving industries including mining, energy, and petrochemicals. The company specializes in advanced welding and metal fabrication designed to make equipment last longer in harsh operating conditions.
Zerucelli pointed to JEBCO's development of UltraClad, a robotic cladding technology, as an example of what he says investment in Canadian companies and workers can produce.
“Technology doesn't replace skilled workers; it gives skilled workers better tools,” he said.
He also tied the announcement directly to the current trade dispute with the United States.
“Our trading relationship with the United States is changing,” Zerucelli said.
He said Canada had negotiated with the U.S. in good faith but walked away from what he described as terms that were “unfair and uneconomic.”
“The door remains open,” he said. “When the U.S. is ready to have serious conversations about trade, we will be ready.”
The federal government has imposed counter-tariffs on some U.S. products after the United States imposed new tariffs on Canadian goods. Ottawa says those measures followed the suspension of trade negotiations with the U.S.
Zerucelli said Canada cannot control decisions made outside its borders but can control how it responds at home.
“We can invest, we can strengthen our supply chains, and most importantly, we can build,” he said.
For JEBCO CFO Andrew Cormier, the tax change is significant because of how businesses normally account for major investments.
Cormier, who is also a director of RiverBirch Global Water, which owns JEBCO Industries, said the current tax system generally assigns different depreciation rules to different types of assets.
Under the new measure, he said, a company could deduct the full cost of an eligible investment in the year it is purchased or the money is spent.
“The major impact is that it is going to reduce the tax amount that's paid in that first year,” Cormier said.
“What it does is free up a significant amount of money, and it makes Canada very appealing compared to other countries as a great place to invest.”
Cormier said that could allow businesses to do more and get a faster return on their investments.
Zerucelli said the goal is to encourage more companies to buy equipment, develop technology, expand their operations and create jobs in Canada.
“Invest here in Canada. Build it here. Grow it here. And create the jobs here,” he said.
The federal government estimates the Productivity Mega Deduction would cost about $36 billion over five years, beginning in 2026-27.
For JEBCO, Zerucelli said the company demonstrates what investment can produce in a Canadian manufacturing operation.
“JEBCO shows what that investment can create,” he said.
