OTTAWA, Feb. 26 /CNW/ - The Railway Association of Canada and industry
suppliers welcomed today's federal budget announcement to increase the
depreciation rate for new and re-built locomotives. The move could lead to as
much as $300 million in investment by the industry over the next five years
and as many as 6,000 jobs throughout the supply and service sector.
Cliff Mackay, President and CEO of the RAC, said: "The government's
change in its tax policy will encourage the acquisition of more fuel-efficient
locomotives that is good for the environment by reducing greenhouse gas
emissions and good for society by helping to reduce congestion."
The new Capital Cost Allowance rate of 30 per cent for locomotives will
make Canadian railways more competitive with U.S. railroads' depreciation
rates. U.S. railroads can also fully depreciate their rolling stock within
eight years while it takes Canadian railways more than 20 years to fully
depreciate similar assets.
More than 40 per cent of the value of a modern locomotive, for example,
is in computer-based information systems and advanced technology. With the
current rate of innovation and development, most major locomotive parts must
be replaced within 10 years," said Mr. Mackay. "Shipper requirements and
changes in market forces have the same effect on the real economic lifespan of
freight cars and intermodal equipment purchased or leased in Canada as in the
U.S. but the tax treatment here is significantly different."
"Today's announcement is an important first step, but not the last
required. With globalization of trade and the fact that we compete on a North
American basis, this initial change in tax policy is good for Canadian
business and workers," said Mr. Mackay. "It is particularly welcome at a time
when there is an urgent need for competitive transportation services and more
opportunities for Canada's rail-component manufacturers and service providers.
I hope the government will take the next step to increase the current Canadian
depreciate rate of 15 per cent to support modernization of freight cars and
intermodal equipment to help Canada and its shippers be more competitive in
The RAC represents some 60 freight and passenger railways that transport
65 per cent of surface freight in Canada, carry 65 million passengers annually
yet generate only three per cent of the nation's transport greenhouse gas
For further information:
For further information: Roger Cameron, Railway Association of Canada,
(613) 564-8097, firstname.lastname@example.org