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Railways hail proposed diesel tax cut

The federal Conservatives’ pledge Tuesday to cut Ottawa’s excise tax on diesel fuel drew kudos from railways as a move that will help exporters compete internationally.

Party leader Stephen Harper said a re-elected Conservative government will cut the federal excise tax on diesel from four cents per litre down to its 1985-86 level of two cents per litre, over the next four years.

“This tax reduction will benefit consumers who buy virtually anything that moves by truck, train, ship or plane,” Harper said.

Based on 2006-07 revenue levels from the excise tax, a reduction of two cents per litre would cut the tax load on truckers, railways, airlines, shipping companies and public transit systems by about $600 million per year, the party said in a release Tuesday.

“Rail is the most fuel-efficient form of surface transport and this initiative will help our manufacturers and exporters compete domestically and internationally,” Cliff Mackay, CEO of the Railway Association of Canada, said in a separate release.

Mackay said the rail industry has long pressed for an end to Ottawa’s tax on locomotive diesel, and added that the U.S. ended its comparable excise tax in early 2007.

The federal diesel tax was put in place in September 1985 at two cents per litre and was raised to three cents, then to four, in January and February 1987 respectively, the party said.

That’s on top of provincial excise taxes on diesel, which the party said average roughly 14 cents per litre, ranging from seven cents in the Yukon to 20 cents in Prince Edward Island. Quebec and British Columbia also charge carbon taxes on diesel.

Farmers in several provinces are eligible for either exemptions or rebates of provincial excise taxes on diesel for farm use. The federal tax, however, applies to diesel sold for farm use.

Ottawa’s excise tax on diesel is only refunded on purchases made for heating oil, electricity generation, ships’ stores and diplomatic use. Several provinces also have agreements that exempt their departments’ vehicles from the federal tax.

“There have been limited rebates for truckers, airlines and ships over specified periods in the past, but none currently apply,” the party said.

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