Finance Minister François-Philippe Champagne declared on Wednesday that the federal excise tax holiday on gasoline and diesel would be prolonged until January 31, 2027. Following this extension, from February 1 to March 31, 2027, the excise tax will be reinstated at 50% of the pre-holiday rate before returning to the full rate on April 1, 2027. This tax relief also encompasses the four-cent per liter excise tax on aviation fuel.
The announcement was made in Ottawa by Champagne, who emphasized the government’s commitment to assisting Canadian families and businesses in coping with the escalating cost of living. Champagne highlighted that the ongoing disturbances in the Middle East have led to increased energy expenses, resulting in higher fuel prices and added financial strain on domestic households, employees, and businesses.
Earlier in April, Carney had temporarily eliminated the 10-cent federal excise tax on a liter of gas, four cents per liter on diesel, and four cents on a liter of aviation fuel until September 7, Labor Day. This move, estimated to cost around $2.4 billion, was intended to act as a temporary measure to alleviate the immediate pressures caused by a surge in global oil prices following the U.S.’s conflict with Iran.
Finance Canada projects that extending the tax holiday will incur an additional $2.9 billion, bringing the total fuel tax relief since April to $5.3 billion. In 2022, the Ford government introduced its temporary fuel tax holiday, reducing taxes on a liter of gas by 5.7 cents and on diesel by 5.3 cents. This adjustment harmonized the provincial tax rates on gas and diesel to nine cents per liter, resulting in annual savings of approximately $115 per household as outlined in the 2026 provincial budget.
In response to the extension news, Ontario Premier Doug Ford expressed support for the decision, advocating for its permanency. When asked about the possibility of making the tax holiday permanent, Champagne remained noncommittal, stating that a decision would be made based on the prevailing circumstances in January.
Conservative Leader Pierre Poilievre welcomed the extension of the excise tax holiday, while urging for further relief by removing all federal taxes on gas and diesel until at least Canada Day 2027. Poilievre emphasized the need for substantial cost reductions to address the financial strain faced by Canadians amidst rising living expenses.
Producers and importers factor excise taxes into fuel prices, which are then passed on to consumers at the pump. Champagne highlighted that the excise tax holiday directly benefits consumers by reducing costs where it is most felt. NDP Leader Avi Lewis criticized the measure as “corporate welfare,” alleging that it benefits oil companies profiting from increased oil prices due to geopolitical conflicts.
Lewis proposed imposing a windfall tax on oil companies to counter rising gas prices instead of offering tax breaks. The ongoing debate on fuel taxes and relief measures continues as stakeholders weigh the economic impacts and benefits of such policies.