Federal Excise Tax Suspension Extended

Geoff Currier and Evelyn Jacks

With the tariff war with the United States heating up, Prime Minister Mark Carney announced on September 2 that the excise tax suspension will be extended until January 31, 2027. This news provides a measure of relief for the average Canadian family but now is the time to get ready for the inflationary effects of the reinstated tax staring in February – already an expensive month for winter heating costs. Here’s what you need to know:

The Background: The tax was initially suspended on April 20, 2026 and amounts to 10 cents per litre of gasoline, 11 cents per litre on leaded aviation gasoline and 4 cents per litre on diesel and aviation fuel. 

It’s Temporary: The government is going to ease us back into the tax. For February and March of 2027, 50% of the tax will be applied; then in April of 2027 the full amount of the tax will be reinstated.

As the people in the trucking business remind us, if you bought it, a truck brought it. Those vehicles, along with the farmers who produce our food and the businesses which manufacture the goods we buy, will all be spared the ten cents per litre. 

The Savings: The suspension of the excise tax on fuel could mean a saving of several hundred dollars a year for a Canadian motorist but the savings could go beyond that.

This will depend upon a family’s lifestyle: the amount of gas pumped, combined with the amount of food and other goods purchased could go beyond 10 cents per litre for our vehicles.

The savings will be most acutely felt in B.C. and Newfoundland and Labrador which typically pay the highest prices for gas in the country. The prairie provinces generally pay the lowest prices.

The Cost: The government’s own figures tell us that this break at the pumps will be costly to the federal treasury. Ottawa reckons that the extension of the tax suspension will cost $2.9 billion and will bring the total cost to the federal coffers up to $5.3 billion by the time Canadians start paying it again.

The Bottom Line: Now is the time to get ready for the inflationary effects of the reinstated tax in February of 2027. Canadians will be hit with a hike of five cents per litre with filling up and then another 5 cents per litre come April of 2027. Your clients need to be prepared that the cost of living will rise noticeably at that time, and they must be prepared to absorb the cost of higher fuel taxes on everything they buy.  

You can help by suggesting ways to reduce debt and increase RRSP and TFSA contributions to reduce tax burdens and increase tax free savings, respectively,  as a defensive strategy. Urging clients to get ready to file returns early to have tax refunds back sooner is also wise. Make those appointments now. 

Finally, invite your clients to listen to Real Tax News with Evelyn Jacks and Friends to understand their tax system better.

Go to learn.knowledgebureau.com/courses/real-tax-news-podcast