New analysis says tax change could add US$900 million to GDP

A new economic analysis commissioned by the Railway Association of Canada says extending 100 per cent immediate depreciation to the transportation and warehousing sector could add nearly US$900 million to Canada’s GDP each year. The report was prepared by Giroux Strategies.

The analysis says the sector faces a higher marginal effective tax rate than its U.S. counterpart, creating a competitive disadvantage for an industry that supports Canada’s trade and supply chains.

“Canada has set ambitious economic objectives – from strengthening productivity and diversifying trade, to building more resilient supply chains,” said Eric Harvey, president and CEO of the Railway Association of Canada. “Achieving those goals will require supportive policies that encourage businesses to invest in the infrastructure that keeps Canada’s economy moving.”

The report says extending immediate depreciation would attract US$591 million in private‑sector investment each year and increase GDP by US$887 million annually. It also says the policy would generate US$1.79 in private investment for every US$1 of net federal fiscal cost, and US$2.70 in GDP growth for every US$1 of net federal fiscal cost. The total federal fiscal cost is estimated at less than 0.1 per cent of federal tax revenues.

“One of the report’s most important findings is that this policy delivers strong economic returns at a relatively modest fiscal cost,” said Jonathan Thibault, director of economics, data and research at the Railway Association of Canada. “Extending immediate depreciation would be a targeted and fiscally responsible way to translate the government’s productivity, investment and trade objectives into measurable economic benefits.”

RAC says the government has already recognized that faster capital cost recovery boosts productivity and attracts investment. The association is calling for 100 per cent immediate depreciation to be extended to the transportation and warehousing sector.