Rajan Wilcox
The Canadian Taxpayers Federation has highlighted the issue of hidden fuel taxes in Ontario, which are contributing to higher prices at the pump. While the federal excise tax on gasoline and diesel fuel in Canada is currently set at 10 cents and 4 cents per litre, respectively, with an additional 5% Goods and Services Tax (GST), provincial taxes can significantly impact the final price. In Ontario, taxes account for about 32-34% of the pump price, or approximately 52-56 cents per litre, including the federal carbon tax, which is expected to increase fuel prices by about 54-55 cents per litre by 2030.
| Characteristics | Values |
|---|---|
| Federal Excise Tax on gasoline | 10 cents per litre |
| Federal Excise Tax on diesel | 4 cents per litre |
| Federal carbon tax | 17.61 cents per litre of gasoline |
| Provincial tax in Ontario | 2 cents per litre |
| Goods and Services Tax (GST) | 5% |
| Average tax on a 64-litre fill-up in Ontario | $33.28 to $35.97 |
| Percentage of pump price in Ontario made up of taxes | 32% to 34% |
| Gasoline tax rate for unleaded gasoline | 9 cents per litre |
| Gasoline tax rate for leaded gasoline | 17.7 cents per litre |
| Aviation fuel tax rate | 6.7 cents per litre |
| Gasoline tax rate for Northern Ontario | 2.7 cents per litre |
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What You'll Learn
Federal excise tax on gasoline is 10 cents per litre
In Canada, motor vehicles are primarily powered by gasoline or diesel fuel, and the country levies excise taxes and other taxes on these fuels. The federal excise tax on gasoline is 10 cents per litre and 4 cents per litre on diesel. This flat rate has been consistent since it was introduced in 1995 for gasoline and in 1987 for diesel.
The federal government also collects a 5% Goods and Services Tax (GST) on fuel, which is a value-added tax applied across the country. In addition, some provinces may levy a Provincial Sales Tax (PST), which can be combined with the GST into a single Harmonized Sales Tax (HST). Quebec, for example, has a separate tax called the QST.
The federal carbon tax adds further costs to the price of gasoline. As of April 1, 2024, the federal carbon tax was $80 per tonne of CO2 equivalent, translating to approximately 17.61 cents per litre of gasoline. This rate is scheduled to increase by $15 per tonne of CO2e each year until 2030. By then, the two carbon taxes are expected to increase the price of gasoline by about 54 to 55 cents per litre.
While the federal tax remains constant across Canada, provincial taxes can significantly impact the final price at the pump. Cities like Vancouver and Montreal have higher fuel taxes due to additional regional taxes. In Ontario, the gasoline tax rates as of July 1, 2022, are 9 cents per litre for unleaded gasoline and 17.7 cents per litre for leaded gasoline. The province also has a lower tax rate of 2.7 cents per litre for Northern Ontario.
The various taxes embedded in fuel prices can make it challenging for consumers to understand the full cost of fuelling their vehicles. In Ontario, taxes make up about 32% to 34% of the pump price, which is approximately 52 to 56 cents per litre.
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Provincial sales tax (PST)
In Canada, motor vehicles are primarily powered by gasoline or diesel fuel. However, other energy sources include ethanol, biodiesel, propane, compressed natural gas (CNG), electric batteries charged from an external source, and hydrogen. Canada levies excise taxes and other taxes on gasoline, diesel, and other liquid and gas motor fuels (collectively referred to as fuel taxes). Additionally, electricity is taxed at various administrative levels.
Provincial sales taxes (PST) are collected by some provincial governments and may be combined with the GST (Goods and Services Tax) into a single harmonized sales tax (HST). PST does not usually apply to fuels like gasoline or diesel. However, it does apply in provinces with a harmonized sales tax (HST) and in Quebec (QST).
In Ontario, the government reduced the tax rate on unleaded gasoline and diesel to 9 cents per litre effective July 1, 2022. This tax rate will revert to 14.7 cents per litre on December 31, 2024. Additionally, the Ontario government announced a six-month interest and penalty-free period from April 1, 2025, to October 1, 2025, during which penalties and interest will not be charged for missed tax payments under select provincial taxes.
The Canadian Taxpayers Federation's Gas Tax Honesty Report reveals that taxes account for 32% of the pump price in Ontario, or about 52 cents per litre. The average tax on a 64-litre fill-up in the province is $33.28. Due to Premier Doug Ford's temporary 6.4-cent per litre gasoline tax cut, Ontarians have the fourth-lowest gas tax burden in Canada.
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Ontario's gas tax cut
In Canada, motor vehicles are primarily powered by gasoline or diesel fuel, with other energy sources including ethanol, biodiesel, propane, compressed natural gas (CNG), electric batteries charged from an external source, and hydrogen. Canada levies excise taxes and other taxes on gasoline, diesel, and other liquid and gas motor fuels (collectively called fuel taxes) and taxes electricity at various administrative levels.
The federal government collects value-added tax (VAT), known as the Goods and Services Tax (GST), at 5% on the cost of fuel. Additionally, some provinces collect a provincial sales tax (PST), which may be combined with the GST into a single harmonized sales tax (HST). The federal excise tax on gasoline is 10 cents per litre and 4 cents per litre on diesel. These flat rates have been consistent since their introduction in 1995 for gasoline and 1987 for diesel.
In Ontario, taxes make up 32% of the pump price, equivalent to about 52 cents per litre. The average tax on a 64-litre fill-up in the province is $33.28. In July 2022, Ontario introduced a temporary 6.4-cent per litre gasoline tax cut, which, according to the Ontario Director of the Canadian Taxpayers Federation (CTF), Jay Goldberg, has saved the typical Ontario family more than $450.
While the federal tax rate remains constant across Canada, provincial taxes can significantly impact the final price at the pump. Cities like Vancouver and Montreal experience higher fuel taxes due to additional regional taxes, while provinces like Alberta maintain lower tax rates overall. Ontario's gasoline tax cut, which took effect on April 1, 2024, was made permanent, providing relief to Ontarians from high fuel costs.
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Federal carbon tax
In Canada, motor vehicles are primarily powered by gasoline or diesel fuel, with other energy sources including ethanol, biodiesel, propane, compressed natural gas (CNG), electric batteries, and hydrogen. The country levies excise taxes and other taxes on gasoline, diesel, and other liquid and gas motor fuels, collectively called fuel taxes.
The federal carbon tax in Canada is aimed at reducing pollution and carbon emissions to combat climate change. The federal government has committed to the Paris Agreement, and the carbon tax is one of the ways to achieve its goals. The carbon tax is levied on fuels like gasoline and natural gas, and there is also a system for big industries. The federal carbon tax currently costs 14 cents per litre of gasoline. The federal government imposed a second carbon tax through fuel regulations that came into effect on July 1, 2024. By 2030, when the fuel regulations are fully implemented, the two carbon taxes will increase the price of gasoline by about 55 cents per litre.
The federal carbon tax rate is scheduled to increase by $15 per tonne of CO2 equivalent each year until 2030. On April 1, 2024, the federal carbon tax increased from $65 to $80 per tonne of CO2 equivalent, translating to approximately 17.61 cents per litre of gasoline and 21.39 cents per litre of diesel. The Federal Excise Tax on gasoline is 10 cents per litre and 4 cents per litre on diesel. This flat rate has been consistent since its introduction in 1995 for gasoline and 1987 for diesel.
The proceeds from the federal fuel charge are returned to the province or territory where they are collected. The Government of Canada does not retain any direct money from pollution pricing. The money is either returned directly to individuals, Indigenous governments, farmers, and small and medium-sized businesses, or sent as a Canada Carbon Rebate. The rebate is tax-free and paid four times a year in advance.
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Goods and Services Tax (GST)
The Goods and Services Tax (GST) is a federal tax levied on the cost of fuel in Canada. It is applied to the final price of fuel, including any federal and provincial excise taxes imposed at the producer or wholesaler level. The GST rate on fuel is typically 5% or 6% of the total cost, although one source mentions a rate of 6% on the final price and a rate of 5% on the cost of fuel before per-litre taxes. This results in a “tax-on-tax” situation, where consumers pay taxes on both the price of fuel and the per-litre taxes added by the government.
The GST is collected by the Canada Revenue Agency and contributes approximately $1.6 billion per year in revenue from gasoline and diesel sales (net of input tax credits). While GST is a federal tax, it is sometimes included in the provincial fuel tax breakdown to illustrate the differences in sales taxes across provinces.
Provincial sales taxes (PST) do not usually apply to fuels like gasoline or diesel. However, there are exceptions in provinces with a harmonized sales tax (HST) and in Quebec, where the Quebec Sales Tax (QST) is levied. Alberta, for instance, has some of the lowest provincial fuel taxes, and its oil-price-based fuel tax relief program provides additional relief when oil prices are high.
In Ontario, the provincial government reduced the tax rate on unleaded gasoline and diesel to 9 cents per litre in July 2022. This rate will revert to 14.7 cents per litre in December 2024. Additionally, Ontario's heat pump rebate program offers incentives to reduce energy costs.
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Frequently asked questions
The fuel tax rate for unleaded gasoline in Ontario is 9 cents per litre.
The fuel tax rate for leaded gasoline in Ontario is 17.7 cents per litre.
The total tax paid on gasoline in Ontario is a combination of federal and provincial taxes. The federal carbon tax is currently 14 cents per litre, while the provincial tax is about 52-56 cents per litre. Therefore, the total tax on gasoline in Ontario is approximately 66-70 cents per litre.
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