The federal government has introduced a tax change aimed at making it significantly cheaper for businesses to invest in new equipment, technology, and infrastructure across Canada, a move that could influence spending decisions well beyond any single announced project.
At the Canada Investment Summit, Prime Minister Mark Carney said businesses will now be able to immediately write off most new capital investments, including machinery, software, research and development, pipelines, fibre networks, and railway infrastructure. Previously, companies had to deduct the cost of major assets gradually over a period of years.
According to Ottawa’s estimates, the change is expected to cut Canada’s marginal effective tax rate on new business investment from roughly 13 percent to about 6.4 percent — nearly halving it. The federal government has said it hopes the policy will help catalyze approximately $1 trillion in investment over the next five years. The summit itself highlighted more than 160 potential projects spanning energy, mining, artificial intelligence, ports, and transportation infrastructure.
Why the Policy Matters for Capital-Intensive Sectors
By allowing companies to deduct more of the cost of new assets right away, the policy improves the near-term economics of large capital projects such as factories, railway expansions, data centres, and mines that might previously have looked only marginally worthwhile. Removing this cost barrier comes as the federal government is simultaneously courting large-scale investment across multiple industries.
Analysts note that the change won’t guarantee that every proposed project gets built, since Canada has a long history of large infrastructure announcements that were never ultimately completed. However, making capital spending less expensive is seen as one less obstacle at a time when Ottawa is pushing companies to increase investment substantially.
A Railway’s Potential Role in Broader Investment Growth
Among the companies discussed as a possible beneficiary of increased capital spending is Canadian National Railway, which operates close to 20,000 miles of track linking Canada’s Atlantic and Pacific coasts with the U.S. Midwest and Gulf Coast. The company moves more than 300 million tonnes of natural resources, manufactured goods, and finished products annually.
Motley Fool Canada contributor Amy Legate-Wolfe wrote that CN could benefit both directly, through incentives tied to its own rail infrastructure spending, and indirectly, if broader capital investment across mining, energy, manufacturing, and port activity increases freight volumes moving through its network. Legate-Wolfe argued that railways function as a kind of indirect way to participate in Canada’s broader capital-spending push, since CN’s network can carry a wide range of goods regardless of which specific sector expands fastest.
Recent Financial Performance
CN’s business has already been showing growth independent of the new tax policy. The company reported second-quarter revenue of $4.8 billion, up 11 percent year over year, while revenue ton miles rose 5 percent and adjusted earnings per share increased 11 percent. Free cash flow for the first half of the year rose 19 percent to $1.8 billion.
Following those results, CN’s management raised its 2026 guidance, now projecting low-single-digit growth in revenue ton miles and mid-to-high-single-digit growth in adjusted earnings per share. The company’s capital program for 2026 is set at roughly $2.8 billion, funding that also supports dividends and share buybacks. CN repurchased approximately $454 million of its own stock during the second quarter alone.
Legate-Wolfe noted that CN shares are trading at around 21 times trailing earnings, and cautioned that railways remain closely tied to broader economic activity. Factors such as a recession, weaker commodity demand, tariffs, or slower industrial production could reduce freight volumes even amid large government-backed investment announcements. She also cautioned that announcements of new projects do not guarantee they will ultimately be built or translate into shipments on CN’s network.
This article is for informational purposes only and does not constitute financial, investment, or legal advice. Consult a licensed financial advisor before making investment decisions.
This article references reporting from:
