Gas tax: Why Canadians are paying more at the pump in some provinces

As gas prices remain stubbornly high across Canada, gas taxes at both the federal and provincial level vary from high to non-existent, as groups like the Canadian Taxpayers Federation (CTF) call for relief.

A Nova Scotia flashpoint

The CTF is calling on Nova Scotia Premier Tim Houston to suspend the province’s gas tax amid continued high prices at the pumps. This comes as several other provinces as well as the federal government have enacted full or partial rollbacks on gasoline taxes.

The CTF notes that the Nova Scotia gas tax amounts to 15.5 cents per litre on gasoline, the highest in Atlantic Canada. “Houston has never cut it,” Devin Drover, CTF’s Atlantic Director and General Counsel, told National Post by email.

He added: “The government has never given a real reason. When affordability comes up, the Houston government points to its one-point HST cut, but it has never touched the 15.5-cent-per-litre provincial gas tax.”

National Post has reached out to the premier’s office for comment.

Suspending the provincial gas tax would save Nova Scotians almost $10 on a 64-litre minivan fill-up, according to the CTF.

Drover said the fuel tax brings in about $297 million a year, per the province’s own budget estimates  “A four-month suspension like P.E.I.’s would run roughly a third of that, about $100 million.”

Alberta takes a three-month break

Last month, Alberta Premier Danielle Smith announced that her government would eliminate its fuel tax for three months to help fight costs. The cut took effect yesterday, Oct. 1, and amounts to a 13-cent-a-litre savings on gasoline and diesel fuel.

“Every fill-up will cost Alberta families and businesses less,” Smith said last week at a speech to the Calgary Chamber of Commerce.

In June she opted to keep the tax but instead invited Albertans to apply for a $100 affordability cheque, available for households making less than $225,000. But Smith admitted the program was not well received, noting: “We have to be willing to take criticism and adjust and change course.”

Ontario, Newfoundland make change permanent

Newfoundland and Labrador had cut its provincial gas tax by 8.05 cents per litre in June 2022, and this year passed legislation to make that decrease permanent, a move applauded by the Retail Council of Canada. It keeps the province’s gasoline taxes at 7.5 cents per litre of gas and 9.5 cents for diesel.

Ontario made a similar move in the same timeframe, cutting taxes on a gas by 5.7 cents and on diesel by 5.3. The rate is now nine cents per litre for both.

P.E.I.’s temporary rollback

Prince Edward Island, meanwhile, has announced a four-month hiatus on gasoline taxes. The cut took effect Sept. 26 and lasts until Jan. 31, 2027. The change saves Islanders 8.47 cents per litre on gasoline and 14.15 cents per litre on diesel until then.

P.E.I.’s move follows a decision by the federal government to extend its own moratorium on gas taxes. Ottawa had already announced in April that the federal tax of 10 cents a litre on gasoline and four cents on diesel would be removed until Sept. 7.

Five days before the end of that period came another announcement that the suspension would continue until Jan. 31, 2027. At that point, the tax will come back at a 50 per cent rate through March 31.

“This will bring down everyday costs for Canadians, including truckers and businesses in the food, agriculture, housing, construction, and delivery sectors,” the government said in a release.

A politically agnostic choice

Nova Scotia has a Conservative government, but Drover said cutting gas taxes is not a party-dependant decision. The Liberal government in Ottawa suspended its tax in April, while Progressive Conservative premiers did it in P.E.I. and Ontario. In Newfoundland and Labrador, a Liberal government cut the tax in 2022 and a Conservative government later made the cut permanent.

“And Manitoba’s NDP ran a full-year fuel tax holiday in 2024, then brought the tax back 10 per cent lower,” he noted.

Taxes on taxes

Even with the federal gas tax suspended, taxes make up 26 per cent of the price at the pumps in Nova Scotia, according to CTF’s recent Gas Tax Honesty Report. Nova Scotia drivers also pay a tax-on-tax of about three cents per litre, because sales taxes are charged on top of all the per-litre taxes.

That report also noted that Montreal has the highest gas taxes in the country at 61 cents per litre, or 35 per cent of the price of gasoline. Drivers in Montreal pay a transit tax when fuelling up in the city, in addition to provincial and federal levies. The rest of Quebec had gas taxes amounting to 33 per cent of the total price.

Similarly, drivers in Vancouver and Victoria also pay transit taxes at the pumps, and had total taxes of 28 and 25 per cent, respectively. Manitobans pay just 17 per cent tax on their gas, with Saskatchewan at 18 per cent.

“Ottawa, P.E.I., Alberta and Newfoundland and Labrador have all delivered meaningful relief at the pumps,” said Drover. “Houston controls Nova Scotia’s gas tax and he needs to suspend it now.”