Finance Minister François-Philippe Champagne declared on Wednesday that the federal excise tax exemption on gasoline and diesel will be prolonged until January 31, 2027. Following this, from February 1 to March 31, 2027, the excise tax will be reinstated at 50% of its original value before returning to the full rate on April 1, 2027. This extension also applies to the four-cent per litre excise tax on aviation fuel.
The announcement was made by Champagne in Ottawa as part of the government’s efforts to assist Canadian families and businesses in coping with the increasing cost of living. Champagne cited the escalating energy costs due to disruptions in the Middle East as the reason for higher fuel prices, which are adding financial strain to households, workers, and businesses in Canada.
Previously, Carney had temporarily eliminated the federal excise tax on gasoline by 10 cents per litre, on diesel by four cents per litre, and on aviation fuel by four cents per litre until September 7. This move was estimated to cost around $2.4 billion and aimed to alleviate short-term pressures caused by the surge in global oil prices following the U.S. conflict with Iran.
The extension of the tax holiday is projected to cost an additional $2.9 billion by Finance Canada, bringing the total relief on fuel taxes since April to $5.3 billion. The Ford government in 2022 introduced its temporary fuel tax holiday, reducing taxes on gasoline by 5.7 cents per litre and on diesel by 5.3 cents per litre. This adjustment harmonized the provincial tax rates on gasoline and diesel, resulting in savings of about $115 per year for households in the 2026 provincial budget.
Ontario Premier Doug Ford expressed support for the extension, calling for the measure to become permanent. When questioned about Ford’s request, Champagne remained noncommittal, stating that a decision would be made based on the global situation in January.
The federal Conservatives have been advocating for the extension of the excise tax holiday since Carney initially announced it. Conservative Leader Pierre Poilievre welcomed the extension but emphasized the need for further tax relief, proposing the removal of all federal taxes on gasoline and diesel until at least Canada Day 2027.
Producers and importers include excise taxes in fuel prices, which are then passed on to consumers at the pump. Champagne highlighted that reducing the excise tax directly benefits consumers by lowering fuel costs nationwide. NDP Leader Avi Lewis criticized the measure as corporate welfare, suggesting a windfall tax on oil companies profiting from higher oil prices due to geopolitical conflicts.
Champagne reiterated the impact of reducing the federal fuel excise tax as a targeted measure benefiting consumers. Meanwhile, Lewis emphasized the ongoing challenges with rising gas prices and proposed alternative measures to address the situation.