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Fuel for the Fire: Tax change fails to recognize how diesel is used

Posted: August 2, 2016 by John G. Smith

A house is not a home — and in the eyes of the taxman it appears your sleeper is no longer a house on wheels.

How else can we explain the end of Federal Excise Tax (FET) exemptions that have long been applied to the diesel that pumps through Auxiliary Power Units and bunk heaters? The heating oil used to warm a house is exempt. Add a few working axles underneath that house and it’s a different story.

The fuel that fires Temperature Control Units (TCUs) and Power Take-Off (PTO) units has been hit as well. Heat a warehouse stocked with food and you are exempt. Store the same food in a reefer parked outside that very warehouse and the Federal Excise Tax applies. The diesel used to generate electricity also escapes the tax, but not the fuel for an Auxiliary Power Unit that helps to make life more liveable on the road.

All told, the Canadian Trucking Alliance estimates this could cost $800 to $1,000 per tractor-trailer per year.

The trucking industry appears to be collateral damage in the wake of a change meant to eliminate a loophole that was being abused by the airline industry, which tried to collect refunds for lighting and other electrical needs.

If tax filers are trying to game the system, a loophole should be closed. But the federal government has failed to recognize that the trucking industry uses diesel for more than turning wheels alone. The changes introduced this July are against the very spirit of the tax. When the Federal Excise Tax was first introduced in 1979, after all, it was only meant to be applied to transportation fuel and not the heating oil used at home or elsewhere.

 “Excise taxes are generally intended to be imposed on luxury products such as jewelry, tobacco and alcohol. Excise taxes are not meant to increase the cost of basic provisions such as food, pharmaceuticals and shelter,” the Canadian Trucking Alliance observes in a briefing note that has been circulating around the industry. “Eliminating FET refunds on temperature controlled and PTO units will increase the transportation cost of the food and other important products Canadian families rely on.”

“If there are problems with a particular sector and technologies, [the Department of] Finance should identify them and impose sanctions directly on those sectors, rather than lump in trucking under a blanket policy,” it adds.

Other jurisdictions understand the difference. The U.S., for example, refunds the excise tax on diesel used in Temperature Control Units.

Yes, many of these tools draw their fuel from a truck’s saddle tanks, but there are solutions if the federal government decides it simply wants more exacting proof to show how diesel is used. The Ontario Ministry of Finance, for example, offers provincial rebates to tax filers who can submit the readings from standalone meters or Electronic Control Modules. When the meter readings are not available, allowances are based on information from equipment suppliers.

The meters and dedicated tanks would add to equipment costs, but at least equipment owners could measure the potential returns against their investments.

The best solution would be to repeal the change, and that is not likely to happen. But Revenue Canada can refine policies to ensure that the tax rebates return money where it belongs – into the pockets of truck owners who have been using diesel for work other than turning a wheel.

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