Economic Update

Rather than cutting the corporate tax rates, the federal government will allow businesses to deduct additional capital investments to make them more competitive at a time when the United States is aggressively cutting taxes, Finance Minister Bill Morneau said on Wednesday. What this means, is that businesses will be allowed to immediately deduct for tax purposes the full cost of machinery and equipment used in the manufacturing and processing of goods, rather than depreciating them over time. The measure covers purchases made on or after Wednesday and expires in 2027. This is not actually a tax reduction, but rather a timing difference, as these assets would have been fully depreciated over time.