OTTAWA, Ont. – The CTA wants Revenue Canada to increase tax breaks for truck companies and truckers.
More specifically, the association is urging Revenue Canada to accelerate the rate at which trucking equipment depreciates for tax purposes and to continue to allow some fines and penalties to be deducted from taxable income.
In a letter to Finance Minister Ralph Goodale, CTA Chief Executive Officer David Bradley suggested that the time is right for an adjustment of Canadian capital cost allowance (CCA) rates for trucking equipment to bring them into line with rates in the United States.
Under the U.S. system, trucks can be fully written off for tax purposes over four years, while in Canada, 17 per cent of the asset cost remains undepreciated at that point.
Bradley pointed to a statement made by then Finance Mister Paul Martin in the 2000 federal budget: “The CCA regime is reviewed on an ongoing basis to ensure that the CCA rates are appropriate and do not impede the ability of Canadian firms to invest and compete.”
According to Bradley, “The trucking industry is still waiting. The Government of Canada should at a minimum alter the current CCA rates to align them with U.S. levels or preferably, bring them below the U.S. levels to provide Canadian-based fleets with some competitive advantage.”
In addition to the cross-border competitiveness issue, Bradley pointed to the need to provide a tax incentive through accelerated CCA rates to encourage the acquisition of new smog-free trucks, which will be available by the 2007 model year. “In order to maximize the environmental benefit of this new generation of vehicles, measures should be undertaken to accelerate their penetration in the marketplace,” said Bradley.
Bradley also recommended the government reconsider its decision, announced in the 2004 budget, to discontinue the practice of allowing taxpayers to deduct fines and penalties imposed by a government agency. “While CTA would agree that it does not make good policy sense to allow for the deductibility of fines and penalties levied for egregious behavior that clearly puts the public at risk, we do not feel it at all fair simply to impose a rule whereby no government-imposed fines or penalties whatsoever can be deducted,” said Bradley.
He pointed out that trucking, as a highly regulated industry, is subject to significant levels of enforcement and often, infractions such as axle overweight violations are beyond the control of trucking companies or their drivers. He also suggested that, “the elimination of tax deductibility effectively increases the punitive level of these fines.”
As an alternative to completely disallowing the deduction of fines and penalties imposed by a government in Canada, Bradley proposed a threshold of $500, below which the longstanding practice of allowing tax deductions would continue.
Finally, Bradley suggested that it would be inappropriate to disallow the deduction of fines and penalties imposed in a foreign country, since the denial of a tax deduction for such penalties serves no public policy objective in Canada.
He pointed out that some of these foreign laws themselves are opposed by the Canadian government: “For example, the Government of Canada has denounced the policy of some U.S. states to impose franchise taxes on international trucking. The Government has stated that such taxes are inconsistent with international tax norms, are an affront to the spirit of NAFTA and are generally repugnant. Additionally, Canadian trucking companies have become easy targets for assessment of huge penalties and fines for unpaid back taxes. Again, the Government has intervened on behalf of the Canadian industry in this regard. What possible public policy objective would be served by making these fines and penalties non-deductible?”