In March, CP Trucks of Toronto, Canada's largest for-hire carrier, joined the growing ranks of Canadian carriers establishing subsidiaries south of the border. It established a U.S. truckload division based in Milwaukee, Wis., called CP America, that will concentrate on full-load generated freight movements across the United States.

The decision to set up a U.S. subsidiary wasn't made solely for operational reasons; the truckload market is extremely competitive in the United States.CP Trucks' U.S. move is important in a strategic sense. It now can take full advantage of better tax breaks south of the border.

As John Sanderson, vice-president of public affairs for CP Trucks, put it: There is a lower corporate tax rate plus faster equipment depreciation in the United States if you operate from a U.S. base across the border, you don't have to worry about the 4-cents-per-liter federal excise tax on diesel fuel. It becomes so obvious you have to move to the United States.

Canadian truckers are chagrined that they're at a competitive disadvantage with U.S. truckers in paying taxes. This discrepancy - and a Price Waterhouse study commissioned by the Canadian Trucking Association in Ottawa indicates that the tax differential for truckers in Canada is 8 percent higher than in the United States - is becoming more painful with the onset of deregulation.

Because entry restrictions are lifting, it's now easier for U.S. carriers to run in Canada, especially in trans-border trucking.

The Canadian trucking industry has urged federal Finance Minister Michael Wilson and his provincial counterparts to immediately address the tax situation. Truckers say that unless the tax bite is eased here more carriers will be forced to shift to the United States.

The fact is that with our industry we do have deregulation and we do have a tax-sharing scheme between the United States and Canada that allows any trucking company to locate its tax base in either country without really moving their operations that much. No other industry has that opportunity, Mr.

Sanderson said.

With President Reagan's tax reforms, the differences between the two regimes is pronounced. U.S. carriers can depreciate 93 percent of the original cost of their tractors in three years, compared with 58.4 percent for Canadian carriers for the same period. In fact, U.S. carriers can depreciate 100 percent of their trucks over four years, while it takes 13 years for Canadian carriers to write off 99 percent. The situation with trailers is similar.

We have our Canadian trailer orders on hold, said Mr. Sanderson, who would rather buy Canadian equipment if all things were equal. But once you move to a U.S. tax base, you start to make your purchases in the United States, maintain your equipment in the United States and hire U.S. drivers.

Canadian carriers based in the United States cannot bring their earnings back into the country without paying a withholding tax.

So you start to invest the profits from the U.S. operations and pretty soon your whole structure is swaying toward the U.S., Mr. Sanderson said.

Within six months, CP Trucks will restructure its five operating divisions so the companycan take full advantage of U.S. tax rates and equipment purchases.

Of course, not all Canadian carriers have the flexibility to set up shop south of the border. The Canadian trucking lobby is putting considerable

pressure on members of parliament to ensure that Ottawa acts soon on tax reform.

John Kennedy, chief executive of the Ontario Trucking Association and vice-president of Business Development for the GTL Transport Group, of Alexandria, Ont., sees the tax situation as blatantly unfair.

From a cash-flow point of view, U.S. truckers are years ahead of us

because of their better depreciation schedules, he said.

The inequity in taxes is not only unnecessary, Mr. Kennedy said, in some cases it could be the straw that breaks the camel's back in terms of competition.

He said the depreciation differences, compounded with Canada's excise tax on diesel ful, are creating havoc for Canadian carriers.

GTL Transport has created a U.S. subsidiary to take advantage of the lower taxes.

The federal Department of Finance has been studying in detail the Capital Cost Allowance provisions affecting truckers.

But tax reform for truckers certainly does not appear to be on top of the government's priority list, said Mr. Kennedy, who was disappointed that there wasn't any change in the last federal budget tabled in February.

The concessions Canadian truckers seek, however, can be introduced by the Finance Department any time.

Mr. Kennedy warns that what is now a trickle of Canadian fleets moving south may well become a flood if Ottawa waits too long before enacting tax reform.

Another sore point for Canadian carriers with Ottawa is the loss in the value of operating authorities. Deregulation has rendered the companies' costly licensing system irrelevant.

We estimate the loss to be somewhere around C$50 million, Mr. Kennedy said.

The industry, he said, would like to see Ottawa establish a C$25 million research unit to be known as the Canadian Transport Research Foundation.

In this way, the government will give us something as an industry to help offset our loss, Mr. Kennedy said.