The following are excerpts from a presentation I made recently to the federal Standing Committee on Finance as part of the 2002 pre-budget consultations in Ottawa:The key economic issues for the truck...
The following are excerpts from a presentation I made recently to the federal Standing Committee on Finance as part of the 2002 pre-budget consultations in Ottawa:
The key economic issues for the trucking industry at the moment are centered on rising costs for equipment, fuel, and insurance. We also remain deeply concerned about the fallout from September 11 on border crossing processes. In order to ensure that trade continues to flow and direct investment continues to migrate to Canada, we need bilateral Canada-U.S. border solutions and we need strategic border and highway infrastructure investment.
For our drivers, we would also like to see the federal government address long-standing concern over driver meal deductibility. The 1994 federal budget introduced changes to the allowable deductibility of business meals for income tax purposes from 80 per cent to 50 per cent. The stated reason for the change was to bring the federal deductions and credits for meal expenses into line with those in the United States.
It is true that the U.S. had also moved to a 50 per cent deduction limit. However, under rules passed in 1997, and revised again in 1999, U.S. meal deductibility rates will be restored to 80 per cent by 2007. Truck drivers, unlike most other workers, do not have a choice as to when or where they stop to eat. Hours-of-service regulations often dictate when they stop. The availability or lack thereof of parking spots that accommodate trucks impacts where they stop. We are talking about subsistence here, not lavish client entertainment, or personal dining experiences. Many Canadian truck drivers are spending considerable time in the U.S., paying for their meals in U.S. dollars which exacerbates the problem.
The meal tax treatment of truck drivers (and no doubt other occupations) is in stark contrast to that enjoyed by federal government employees. They receive a daily composite tax-free allowance of $59.40 to cover the cost of meals and incidental expenses while travelling on government business. Fair is fair.
Fiscal measures can also play a positive role in advancing the environmental agenda. The traditional public policy approach to addressing environmental issues has been to regulate. Just recently, Environment Canada introduced regulations for heavy truck diesel fuel and engine emission levels. These regulations will produce staggering reductions in smog forming emissions of nitrogen oxides, volatile organic compounds and particulate matter, which also contribute to respiratory illness. Indeed, there will be an over 90 per cent reduction in emissions by the 2007 model year.
However, clean air doesn’t come cheap. To achieve these tremendous reductions, trucking companies will incur significant operating and capital cost increases. The USEPA estimates we could see $20,000 added to the purchase and operating cost of a truck. Fuel consumption will increase by as much as five percent.
The changes begin this fall (Oct. 1st). Not unexpectedly, there has been a period of frantic pre-buying. The time is ripe for the federal government to consider the use of fiscal instruments to speed introduction of newer, cleaner technology into vehicle fleets by attenuating some of the cost impact that flows directly from government regulation. Fiscal instruments should not be seen as replacement for regulation, but a means to support it.
CTA sees potential in various approaches: tax credits, rebates, accelerated Capital Cost Allowance rates. The issue of CCA rates in past pre-budget submissions has been raised, as well as in a recent submission to the Department of Finance on section 43.1 of the income tax regulations, which provides for accelerated write-offs for emerging environmental technologies used in power generation. A decision to broaden Class 43.1 to include technologies that reduce health related emissions would be ideal.
We do not want to see another pre-buy situation in late 2006. But we also don’t want to be overly prescriptive as to how to achieve this objective. While CTA has consistently supported the federal agenda on cleaner engines/fuels – and indeed trucking is the only mode to have such regulation – we are being challenged to simultaneously reduce GHG’s linked to global warming. CTA is committed to doing its part on global warming. But, the emissions/fuel efficiency trade off is a limiting factor. Therefore, we also encourage the committee to also examine use of fiscal instruments for “add on” equipment designed to improve fuel consumption and reduce greenhouse gas emissions (e.g., anti-idling devices). The Argonne National Laboratory in the U.S. recently observed, “market acceptance (in the trucking industry) of any of these technologies would have to be augmented by appropriate government incentives.”
In conclusion, our message to the committee is that there is great potential to use fiscal instruments to buttress environmental regulation. A fiscal incentive, whose ultimate impact will be cleaner air and lower health care costs, seems appropriate.
Since making this presentation, of course, we now have a new finance minister in Ottawa.
It will be interesting to see whether these matters get the attention they deserve.
– David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.
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