Tax Revisions

Historically, the financial difficulties experienced by all railways in their infancy, forced massive public expenditures in the form of cash grants, guaranteed interest, land grants, rebates, and rights-of-way.  In return, the railways contributed to general economic developments, and the indirect benefits for business and employment were significant.  The railways were and continue to be major catalysts in the process of industrialization, tying together the national economy and opening up new markets.

The evolution of the railways in current times has reached the self-sufficiency stage, however, their disposable capital flexibility has been negatively impacted by taxation measures, until recently.    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%); trucks (40%); road trailers (30%); vessels (33%); and aircraft (25%). U.S. rail rolling stock is fully tax depreciated after seven years, compared to what was more than 20 years in Canada.

References:  https://www.thecanadianencyclopedia.ca/en/article/railway-history - Economic and Industrial Impact