Finance Minister François-Philippe Champagne declared on Wednesday that the federal excise tax holiday on gasoline and diesel will be extended 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-tax holiday value, before returning to the full rate on April 1, 2027. This extension also encompasses the four-cent per litre excise tax on aviation fuel.
The announcement was made by Champagne in Ottawa as part of the government’s measures to assist Canadian families and businesses in coping with the escalating cost of living. Champagne attributed the surge in energy costs and fuel prices to ongoing disruptions in the Middle East, putting additional strain on households, workers, and businesses in Canada.
In April, Carney 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, aimed to alleviate short-term pressures caused by the rise in global oil prices due to the U.S. conflict with Iran.
The extension of the tax holiday is projected to incur an additional $2.9 billion, 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 gas and diesel, harmonizing the provincial tax rates and saving households approximately $115 annually, as stated in the 2026 provincial budget.
Ontario Premier Doug Ford welcomed the news of the extension, advocating for its permanency. When asked about Ford’s request for a permanent tax holiday, Champagne remained noncommittal, indicating that a decision would be made based on the global situation in January.
The federal Conservatives have been urging the government to extend the excise tax holiday since its introduction by Carney. Conservative Leader Pierre Poilievre, while acknowledging the relief provided, deemed it insufficient for Canadians already struggling with escalating costs. Poilievre reiterated his call for the removal of all federal taxes on gasoline and diesel until at least Canada Day 2027.
The excise taxes on fuel are factored into prices by producers and importers, eventually affecting end consumers at the pump. Champagne highlighted that the excise tax holiday directly benefits consumers by reducing costs where it matters most. NDP Leader Avi Lewis criticized the measure as corporate welfare, favoring oil giants profiting from increased oil prices due to global conflicts.
Lewis proposed imposing a windfall tax on oil companies instead of further public handouts, pointing out that gas prices continued to rise even after the initial tax holiday. He suggested that companies benefiting from heightened oil prices due to geopolitical factors should be subject to additional taxes.