Bill Rowat, President and CEO of the Railway Association of Canada, commended the federal government for delivering a balanced budget, despite its fiscal pressures.

Rowat expressed disappointment that the government was not yet able to address the rail industry's need for Capital Cost Allowances that are competitive throughout North America, and between modes.

"The difference in tax policy approach means that it takes U.S. railroads eight years to depreciate their locomotives and freight cars and 20 years in Canada," said Mr. Rowat. "That means Canadian assets are obsolete in their market long before they're physically worn out. Canada's approach is old- fashioned. It ignores the rapid pace of technological change."

The Canadian depreciation rate for trucks is 40 per cent; ships, 33 per cent, and aircraft, 25 per cent. U.S. railcars were depreciated at rates equivalent to a CCA of 30 per cent while Canadian freight cars and locomotives' depreciation rate is 15 per cent.

As a short-term economic stimulus post-Sept. 11, 2001, the U.S. government increased the depreciation rate for all sectors by an additional 40 per cent.

"Canada's current approach is not consistent with this country's economic role as a trading nation. And it is incompatible with freight and passenger rail's potential to help government, and society, reduce road and airport congestion, fuel consumption and pollution," said Mr. Rowat.

He said an overhaul of the Canadian capital cost regime is long overdue, with rail requiring an increase in its rate to a minimum of 30 per cent to correct a market imbalance and act as a stimulant to new investment in more environmentally-friendly equipment.