Finance Minister François-Philippe Champagne revealed on Wednesday that the federal excise tax holiday on gasoline and diesel will be extended until January 31, 2027. Following this, from February 1 to March 31, 2027, the excise tax will be reintroduced at 50% of its pre-tax holiday value before returning to the full rate on April 1, 2027. This extension also encompasses the four-cent per liter excise tax on aviation fuel.
Champagne made this announcement in Ottawa, emphasizing the government’s commitment to supporting Canadian families and businesses facing the challenges of a rising cost of living. He highlighted that ongoing disruptions in the Middle East are leading to increased energy costs, driving up fuel prices and adding pressure on domestic families, workers, and businesses.
Earlier in April, a temporary removal of the federal excise tax on gas, diesel, and aviation fuel was implemented until September 7, in line with Labour Day. This move, estimated to cost around $2.4 billion, aimed to alleviate short-term pressures caused by the surge in global oil prices following the U.S.-Iran conflict.
The extension of the tax holiday is projected to incur an additional $2.9 billion, bringing the total relief on fuels since April to $5.3 billion. Furthermore, in 2022, the Ford government introduced its own temporary fuel tax holiday, reducing taxes on gas and diesel by 5.7 cents and 5.3 cents per liter, respectively. This adjustment aligned the provincial tax rates on gas and diesel to nine cents per liter, resulting in annual household savings of approximately $115, as stated in the 2026 provincial budget.
Responding to the extension news, Ontario Premier Doug Ford expressed support for the move, advocating for its permanency. When questioned about Ford’s proposal, Minister Champagne maintained a noncommittal stance, suggesting a decision would be made based on future circumstances.
The federal excise taxes levied on fuel by producers and importers are eventually passed on to consumers at the pump. Champagne emphasized that the excise tax holiday directly benefits consumers by reducing costs where it is most impactful. The measure aims to lower fuel expenses nationwide, with immediate price reductions observed when the holiday was initially introduced in April.
While the extension of the tax holiday received mixed reactions, Conservative Leader Pierre Poilievre welcomed the initiative but called for broader tax relief, urging the removal of all federal taxes on gasoline and diesel until at least Canada Day 2027. NDP Leader Avi Lewis criticized the measure as corporate welfare, favoring a windfall tax on oil companies benefiting from heightened oil prices due to geopolitical events.
In conclusion, the decision to extend the federal excise tax holiday reflects ongoing efforts to address economic challenges and support Canadians amid rising energy costs.