Hidden Tax Burden

Drive Star operates in the “drive away sector” of the transportation industry, offers piggy back tractor and chassis delivery services, delivers tanks and trailers in North America.

Most of the equipment the company delivers can be best described as self-propelled commercial vehicles most of which will be licenced by the end user for on road use. Other than the fact that our company does not own or lease the equipment it delivers, it has all of the challenges that most motor carriers have to deal with. 

Recently it was suggested to me that a large part of the costs of our operation and hence our rates was the result of “hidden costs” connected with government entitlements of one kind or another. It is no secret that carrier costs are adversely affected and as a result the costs of everything produced and sold are increased. It may also adversely affect our international competitiveness.

Payroll burden is one example. Driver costs are significant costs for all carriers but in addition to the driver direct costs most carriers incur up to 24% in additional payroll charges mandated by one government or another or actually collected by government.

The makeup of these payroll burden costs includes:

  • unemployment insurance premiums
  • state sponsored pension plans
  • workers compensation premiums
  • statutory holiday payments, vacation entitlements

The price of fuel is another cost element that is impacted by a variety of taxes depending on the jurisdiction. Various types of road taxes can add up to 30% of the cost of fuel purchased. In Canada the Harmonized Sales Tax (HST), Goods and Services Taxes (GST) and/or Quebec Sales Taxes may apply as well.

Most carriers will also find sales taxes ascribed to the cost of insurance another significant cost.

In addition to the above our industry pays tolls, purchases permits for over- weight and over dimension loads. There are property taxes and income taxes and likely many more charges that I have not identified.  My guess is that the overall tax burden excluding property taxes, income taxes and sales taxes is in the range of 15%-20% of the overall costs.

The public good is well served when the private economy is strong and profitable. It is wealth created by the private economy that funds all government activities. The tax burden on most businesses-and carriers in particular-is a heavy one and perhaps too heavy one might argue.  Food for thought.

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