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Tax burden curtails Canadian railroads' competitiveness, study says

Canadian railroads carry a far heavier tax load than Canadian truckers and U.S. railways, and that load is cutting into Canadian roads' ability to compete in the burgeoning NAFTA transport market, according to a study commissioned by Railway Association of Canada (RAC).

Based on 1999 figures, the tax burden Canadian railways bear is more than twice the one U.S. railroads bear, and 29 percent higher than the tax load Canadian truckers carry, according to the study, completed by KMPG L.L.P.

"Canadian railways are facing an excess tax burden — 13.4 percent of their revenue — in particular when compared to their most direct competitors, U.S. railroads [6.4 percent] and Canadian truckload carriers [10.4 percent]," said Denis Lacroix, study leader and a partner in KPMG, in a July 10 statement.

Particularly onerous, RAC believes, is Canada's federal excise tax on locomotive fuel. RAC plans to "argue strenuously" to eliminate the tax, originally established as a deficit-reduction measure, by phasing it out at a 1-percent-per-liter clip, said Sab Meffe, Canadian National Railway's taxation director taxation and RAC's taxation committee chair.

Moreover, state fuel taxes in the United States on average are "significantly less" than provincial locomotive fuel taxes in Canada, which is "especially important in a country whose north-south trade growth is so critical to its economic health," Meffe added.

Overall, Saskatchewan railways are taxed at the highest rate in Canada, at 15.4 percent of their revenue, according to the study. Railways operating in Manitoba are taxed at 14.6 percent; British Columbia, 14 percent; Ontario, 13.6 percent; Quebec, 11.4 percent; New Brunswick, 9.9 percent; Nova Scotia, 9.3 percent; and Alberta, 8.9 percent.

"Some jurisdictions may be willing to explore the Road Relief and Shipper Tax Credit proposal to divert freight from road to rail, save highway maintenance and construction costs borne by governments, and reduce greenhouse gas emissions," Meffe said. "We are willing to discuss all options."

Contact Progressive Railroading editorial staff.

More News from 7/12/2001