Tax Revisions

CARS welcomed the tax measure in Budget 2008 that increases the rate of depreciation for locomotives to 30% but maintains the increase must also extend to freight cars and intermodal equipment.

By raising the capital cost allowance rate to 30%, railways will now be better able to modernize their locomotive fleets which will lead to increased productivity through more efficient technologies, reduced emissions, increased safety, and decreased congestion when moving people and goods throughout Canada. Canada has currently over 400 railway suppliers and employs over 80,000 workers. Implementing this recommendation means close to $300 million in new spending by the railways over five years. However, the unanimous Standing Committee on Industry, Science and Technology and the Standing Committee on Finance both recommended the rate of depreciation on rolling stock be increased to 30%. New technologies such as lighter materials for freight cars allow railways to carry greater loads, improving efficiencies and lowering its already advantageous environmental impact. Furthermore, new processes in car designs also provide greater efficiencies when loading and unloading products key to Canada´s economy.

Rail is the least polluting and most capital-intensive of all modes and had the lowest CCA rate: locomotives (15 per cent); trucks (40 per cent); road trailers (30 per cent); vessels (33 per cent); and aircraft (25 per cent). U.S. rail rolling stock is fully tax depreciated after seven years, compared to what was more than 20 years in Canada.

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