Railways carry heavy tax load, says report

Professional services firm KPMG LLP has released an independent report on Canada’s railway industry. The report, commissioned by the Railway Association of Canada, updates industry data on the impact, and consequences, of transportation taxation on Canada’s competitiveness in international markets. It also finds that railways carry a far heavier tax load than their competitors and many of the industries that they serve.

“The tax burden of Canadian railways is more than twice that of U.S. railroads and 29 per cent higher than the tax burden of Canadian trucking.The KPMG report clearly documents the modal imbalance. We will use it to discuss government’s intentions to address the problem. They need to understand this is not just a railway problem. The issue involves government, other industries, and affects the public,” said Sab Meffe, chair of the Railway Association of Canada’s taxation committee and director of taxation for Canadian National Railway.

According to Meffe, the Railway Association of Canada will seek the elimination of the federal excise tax on locomotive fuel by phasing it out at the rate of one per cent per litre a year.

The Canadian federal tax is almost two and a half times higher than the current, comparable U.S. federal fuel tax. State fuel taxes on average are significantly less than provincial locomotive fuel taxes. That is especially important in a country whose north-south trade growth is so critical to its economic health, said Meffe.

“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. We are willing to discuss all options. The fundamental issue, nevertheless, is the need to create balanced transportation systems that use all modes to their best advantage. Rail also builds and maintains its own traffic corridors, and pays property taxes on them. This is in addition to the approximately $165 million they pay in federal and provincial locomotive fuel taxes across the country each year. That’s money not available for reinvestment in the business and for customer service improvements,” said Meffe.