It’s no secret that Canada is making a significant push to encourage businesses to invest more money in the country, and one of its latest tax proposals could create opportunities for investors in a wide range of TSX stocks.
In September, Prime Minister Mark Carney’s government introduced the proposed Productivity Mega Deduction, which would allow businesses to write off the full cost of a much broader range of eligible investments in the year they’re put to use, rather than over several years.
In fact, the government estimates that the measure would reduce Canada’s marginal effective tax rate on new investment from roughly 13% to 6.4%.
And there’s a reason Ottawa wants to encourage that spending. When businesses invest in more efficient equipment, new facilities and infrastructure, they can improve productivity, expand their operations and make Canada a more attractive place to do business.
However, what’s particularly interesting is how many TSX stocks could benefit, including businesses that aren’t even making those investments themselves.
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Why so many TSX stocks could benefit
For companies already spending billions to develop their operations, the benefits can be fairly direct.
Take Canadian Natural Resources, for example. It invests heavily in oil and gas assets every year, so being able to deduct more of that spending right away could improve the economics of its projects and free up cash sooner.
But there’s another side to the opportunity. When a company decides to develop a mine, expand a factory or build new infrastructure, it doesn’t do everything itself. It also needs contractors, engineers, specialized equipment and other businesses to help complete the project.
That’s where companies like Bird Construction and Stantec come in.
If these incentives encourage more businesses to move ahead with new projects, Bird could see additional demand for its construction services, while Stantec could benefit from more engineering, design and environmental work.
Plus, these businesses serve customers across several industries, giving them multiple ways to benefit from an increase in Canadian investment.
However, even with so many high-quality options to choose from, if I had to choose just one stock to buy first, it would actually be Toromont Industries (TSX: TIH).
Why I’d buy Toromont for the long haul
Toromont operates one of Canada’s largest Caterpillar dealerships, selling and renting heavy equipment to customers in construction, mining and other industries.
That’s an attractive business because when companies invest in major new projects, they often need machinery to move materials, prepare sites and keep their operations running.
However, what makes Toromont even more compelling as a long-term investment is that the initial equipment sale is only part of its business.
It also provides parts, maintenance and repairs for the equipment its customers operate. So, even after a project is completed or demand for new machines slows, Toromont can continue generating revenue by servicing machinery already in use.
Furthermore, the TSX stock has an extensive dealership and service network, which makes it easier for customers to get the support they need, helping strengthen those relationships over time.
And Toromont’s business was already growing before these new tax incentives were announced.
In fact, its product support revenue grew by an average of 7.9% annually over the five years through 2025, showing how servicing its customers’ equipment has continued to create opportunities for growth.
Plus, the company announced roughly $1 billion in firm power systems orders in June, expected to be delivered primarily in 2027, giving it another significant opportunity for growth.
Now, Toromont certainly isn’t cheap. It currently trades at roughly 27 times analysts’ expected earnings for 2026.
However, with its established customer relationships, growing product support business and opportunities to benefit from additional Canadian investment, it’s a premium I’d be willing to pay.
That’s why Toromont would be my first pick among the TSX stocks that could benefit from Canada’s investment push, and one I’d look to own for the long haul.
