The Trucking Network
Canadian government is fond of encouraging that corporate tax rates in Canada are lower than in the U.S., and that is true. However, many U.S. competitors are also owner-managed businesses, and in the U.S., the corporate tax rate doesn’t apply to them, even if they are incorporated. Under the U.S. tax system, more than 90% of owner-managed corporations are LLC’s or S corporations, which, although they are legally corporations, are ignored for tax purposes. Instead, their income is taxed in the hands of their shareholders, at personal tax rates. Those personal tax rates are much lower than the corresponding tax rates in Canada. Furthermore, American taxpayers have an unlimited ability to split income with spouses, and significant flexibility in splitting income with other family members. While the government may find it problematic for Canadian business owners to split income with family members, there still needs to be a recognition that, in combination with recent increases in personal tax rates in Canada (in Ontario, for example, the top marginal tax rate has increased from 46% to 54% in recent years), changes in this area could compound completive issues between Canadian and US carriers.
“Many trucking companies derive a considerable amount of their revenue from cross-border freight, which is an area where they face significant competition from U.S. operators.”
Trucking moves approximately 90% of all consumer products & foodstuffs and almost two-thirds (by value) of Canada’s trade with the United States. In 2016, about 10.9 million two-way trucking movements were recorded at Canada/U.S. border points, up 3.2% from 2015. This was the highest number of trucks crossing the border since 2008. The value of trucking traffic between Canada and the U.S. totaled $418 billion in 2016 ($218 billion for exports and $200 billion for imports), up 16.3% from 2015. The same commodities dominated both exports and imports: automotive products, machinery and electrical equipment, other manufactured products, and agricultural products. Over 40% of Canada’s GDP is dependent upon trade with the United States. Over 70% of what Canada produces is destined to the United States, reflecting the integrated nature of our economies. Anything that negatively impacts or restricts access to the US market for Canadian fleets will in turn have a negative impact on the overall Canadian economy.