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There was some good news on Tuesday for the many Canadians feeling stressed about the prices at the gas pumps.
The Liberal government said it will suspend the fuel excise taxes on gasoline and diesel from April 20th until Labour Day. The ongoing conflict in the Middle East has caused prices to surge across the globe, mainly due to issues around tanker traffic passing through the Strait of Hormuz.
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Prime Minister Mark Carney said that during the pause, Canadians can expect to save 10 cents per litre on regular gasoline and four cents per litre on diesel.
Business analyst Paul Martin said the move will help keep more money in people’s pockets in the short term, but won’t help Ottawa dig itself out from major deficits. Ottawa reported a budgetary deficit of $31.21 billion for the April-to-January period of its 2025-26 fiscal year.
“It’ll be welcome in terms of people having cash flow, or having a little spare money in their jeans, and that should stimulate some spending, which is probably good news for the economy,” Martin said.
“The flip side is, it’s less revenue for the government, and they’re already in a pretty serious deficit, so this will just make that worse.”
While it will help those struggling to afford the necessities in the short term, Martin said the long-term effect of the tax break aren’t yet clear.
“It’s not enough to really make your house cheaper or whatever, but it’s an affordability thing, and it’s taking out of one pocket and putting it in the other, but it’s more efficient, I think, to have people spending the money than the government spending the money,” he said.
“To that extent, it might just tip in favour of a good idea,” he added.
Martin said the politics surrounding the federal government’s move are quite interesting, coming the morning after the Carney government secured a majority through wins in three byelections, following a series of high-profile parliamentary floor crossings.
“Theoretically, you’d be trying to curry favour with the electorate, and you do that less than 24 hours after you win a majority,” Martin noted.
As for the government losing the extra revenue, Martin said future generations may struggle to pay off Canada’s federal debts.
“It’s just a further sign that it’s easier for the government to kind of just keep digging the hole deeper,” Martin explained.
“If you want to get out of debt, the first thing you do is stop digging a hole. And they’re not doing that right now.”
Taxpayers federation wants temporary relief made permanent
While the lower gas taxes announced by the federal government will “temporarily benefit” Canadians, a release from the Canadian Taxpayers Federation (CTF) on Tuesday indicated spending cuts are needed to make the tax relief permanent.
Franco Terrazzano, CTF federal director, said the organization has pushed for this gas tax relief for a long time.
“The government’s decision to cut taxes at the pumps will help a lot of people for a few months,” Terrazzano said. “Cutting taxes is the fastest, simplest and easiest way for the government to make life more affordable and ease the pain of high gas prices.
“Now the government needs to cut wasteful spending so it can cut taxes permanently and make life more affordable for more than a few months.”
The organization’s release noted that the federal government also charges sales tax on gas and diesel while imposing fuel regulations that are currently costing drivers up to seven cents for each litre of gas.
Terrazzano called Carney “right to cut gas taxes,” and called on the Prime Minister to “find savings to stop the debt from spiraling and make room for permanent tax cuts.
“Cutting taxes makes life more affordable and the government needs to cut spending so it can provide permanent relief for taxpayers.”
–with files from The Canadian Press
