GANDER, Nfld. — The newly revealed Newfoundland and Labrador budget has left many trucking companies on the island scrambling for solutions.
The new budget, announced in late April, was introduced to help solve the province’s nearly $2-billion deficit and includes significant tax increases and fee hikes that will impact trucking companies directly.
Specifically, the province introduced a five cents per litre diesel tax increase, a 15% sales tax on insurance premiums and a fee increase on various licences and permits, as well as a 2% HST hike.
The trucking community in the province says it was shocked by the news of the budget and for most, that it will erase their bottom lines as a business.
“We were shocked,” Barry Warren, president of Dooley’s Trucking in Gander, Nfld., said to Truck News when asked about his initial reaction to the budget announcement. “We knew it was going to be tough, but I didn’t realize it was going to be this tough.”
Warren said the budget forced him to crunch the numbers over the weekend after it was revealed and initially he thought he was looking at an increase of about $98,000 per year in operating costs.
“Since then, there were some things we’ve missed, and that number is now closer to $129,000,” he said. “My biggest concern is that is a moving target, this number. It continues to grow. My initial numbers were tied to the 15% tax on the insurance but I didn’t factor in my cargo insurance, the insurance on my building, etc.”
Gord Peddle, partner and COO of Atlantica Diversified Transportation Systems, which has two locations in Newfoundland, said the taxes announced in the budget target trucking companies directly.
“I can’t say I was surprised somewhat of a tax collection moving forward in (the government’s) new budget, but to this extent, yes we were very surprised,” he said. “They’ve attacked pretty much every part of our business from fuel to insurance to the HST, they’ve hit every portion of our list of expenditures.”
Peddle told Truck News he estimates that the new budget will cost his business $200,000 a year more just because of the fuel tax increases.
“With the 15% on insurance, that could correlate to as much as another $50,000 per year,” he added.
Jean-Marc Picard, executive director of the Atlantic Provinces Trucking Association, said the budget puts trucking companies in the province at a competitive disadvantage and it will be especially hard on the consumer at the end of the day.
“We understand the province is in a very difficult financial situation but a five cents per litre increase on diesel tax is very steep,” he said. “It puts Newfoundland and Labrador at the highest in the country along with New Brunswick at 21.5 cents per litre for diesel tax. This is not the ideal scenario since residents of Newfoundland and Labrador traditionally pay more for their goods because of the ferry services that bring goods to the island.”
Peddle agreed, saying that when it comes to the budget, the consumer will be hit the hardest, especially because of the HST hike going from 13% to 15%.
“These tax increases will be added to the increased cost of trucking, so at the end of the day, the end consumer will likely pay more for everything we buy – from groceries to building supplies,” he said.
He added though his business hasn’t yet made immediate decisions on where and if it will be cutting costs, he will have to make some key decisions in the coming months in terms of staying in the province.
“In a business where margins are already so thin, those kinds of costs cannot be burdened on the company,” he said. “We understand smaller companies will crumble, but even larger businesses…it makes you second guess whether doing business in Newfoundland is worth it.”
Warren, whose business is small with only 68 pieces of equipment, said he has no choice but to cut costs in the coming months. Unfortunately, he said, this includes looking at layoffs.
“We’re looking at our fleet and we’re looking to downsize,” he said. “We’re looking at all of our costs right now and if we see any areas where we can cut some costs, we’ll do that. I’m trying to avoid layoffs…because my employees day in and day out they work very hard, but I do have to make some difficult decisions in the next few months. You invest time and money into people and you don’t want to lose them. It’s just left everyone in shock, and it seems like there’s no end in sight or no light at the end of the tunnel, and my fear is the real ramifications haven’t been felt yet and the reason for that is that these announcements just came down. I think there will be major protests soon.”
But despite the discouraging news, Peddle and Warren seem confident that both of their businesses can survive the budget storm.
“At the end of the day we’ll approach it with the same positive attitude that we’ve approached everything in trucking and we’ll try to recover these costs over the coming months and make decisions from there,” Peddle said.
“We’ve survived on this island for a long time, so I believe, though it’ll be hard, we will survive this, too,” Warren added.
Sonia Straface is the associate editor of Truck News and Truck West magazines. She graduated from Ryerson University's journalism program in 2013 and enjoys writing about health and wellness and HR issues surrounding the transportation industry. Follow her on Twitter: @SoniaStraface. All posts by Sonia Straface