Canada pausing federal gas tax and here's how much you can save

Canadians will soon feel some relief at the pump, as Canada is set to temporarily suspend the federal gas tax.

Prime Minister Mark Carney announced in a press conference on Tuesday that the new Liberal majority government will temporarily suspend the federal fuel excise tax from Monday, April 20, to Monday, Sept. 7, 2026.

"We all know that because of the war with Iran, fuel prices have increased sharply around the world, including right here in Canada, so we’re taking more action to help build that bridge over short-term pressure," stated Carney.

LIVE: Cutting fuel costs in Canada • EN DIRECT : Réduire les coûts de carburant au Canada https://t.co/4tgH71OyJy

— Mark Carney (@MarkJCarney) April 14, 2026

For those who don't know, since 1995, the Canadian government has charged an excise tax at a flat rate of 10 cents per litre on gasoline. That federal gas tax has been four cents per litre on diesel since 1987.

An excise is a government tax on specific goods manufactured and sold for domestic consumption.

This means that starting next week, the price of gas will drop by ten cents per litre and four cents per litre for diesel. A family with a sedan will save around $4.90 in excise taxes per tank of gas. Taking into account sales taxes, this amounts to a savings of around $5.63 per tank.

Combined with the end of the consumer carbon tax last year, Carney said that the federal government will have reduced gas prices by up to 28 cents per litre.

Canadian public policy think tank MEI said that the suspension of the federal gas tax is a "step in the right direction," but argued that the government should make this measure permanent.

"Taxpayers had not yet recovered from the inflation of the past few years, when the rapid increase in the price of gas came along and shrank their purchasing power even more," explained Gabriel Giguère, senior policy analyst at the MEI, in a statement.

"A temporary tax holiday only helps temporarily. If it were to make this reduction permanent, the government would be returning hundreds of dollars a year into families' pocketbooks."

As of Tuesday, the United States has begun its blockade of the Strait of Hormuz. The crucial passage way for one-fifth of the world's oil supply was shut down by Iran’s new supreme leader, Mojtaba Khamenei, in March, causing oil prices and, therefore, jet fuel costs to spike.

Canadians are certainly feeling the effects on their bank accounts. According to GasBuddy, gas prices in Canada reached their highest average of the year so far on Tuesday, April 8, at 184 cents per litre.

The pressure hasn't only been felt at the gas pump. Everyday services involving travel and shipping have added fuel surcharges in response to rising oil prices.

Carney added that the government will also remove the federal excise tax on aviation fuel. This comes as major Canadian airlines added fuel surcharges on certain bookings.