Excise Tax Act

Moved second reading of Bill C-38, An Act to amend the Excise Tax Act (extension of the federal fuel excise tax relief).

He said: Honourable senators, it is a privilege for me to rise today to speak to Bill C-38, the Canadian Fuel Affordability Act.

Canadians are living in a rapidly changing world, a world that is more complex, more unstable and, for far too many of them, more expensive and unpredictable.

Today, I will present the bill before us and explain how it fits into the broader context of the measures that the government is taking to help Canadians cope with affordability challenges in a time of prolonged global uncertainty.

The cost of living remains a major concern for many Canadians, and the government has adopted measures to help them keep more of their hard-earned money.

Colleagues, Bill C-38 is an integral part of that effort. It will continue to provide much-needed relief at the pump.

To fully grasp the scope of this bill, it is important to consider the broader economic context in which it is set.

Global conflicts and ongoing supply disruptions in the Middle East are driving up fuel prices around the world. At the same time, the United States is imposing new tariffs on Canada.

These events only serve to increase the uncertainty faced by businesses, workers and families.

As we know, Canada is not immune to the disruptions occurring beyond our borders. These geopolitical factors have driven up the cost of basic necessities in many economies and, in Canada, they are adding to the financial burden on households.

Many of these pressures are beyond Parliament’s control. Nevertheless, governments can take targeted measures to help households and businesses mitigate the negative impacts in a changing economic climate.

To help Canadians cope with rising fuel and transportation costs, in the spring of 2026, the government temporarily suspended the federal excise tax on leaded and unleaded gas, diesel fuel and jet fuel.

This measure temporarily reduced the federal excise tax rate on fuel to zero cents per litre.

The data show that this reduction quickly translated into savings at the pump, with gas prices dropping by 11 cents a litre on the first day of the suspension.

The fuel excise tax suspension was due to end on September 7, but ahead of this deadline, the government announced its plan to extend the suspension so that it could keep supporting Canadians.

If passed, Bill C-38 will extend the suspension of the federal excise tax on fuel until January 31, 2027.

After that, the regular rates will be discounted by 50% until March 31, 2027. This measure aims to lower daily spending by Canadians, including truckers and businesses active in the food, agriculture, housing, construction and delivery sectors.

Honourable senators, the impact of fuel costs extend far beyond the money that Canadians spend to fill up their vehicle. Transportation costs are a critical factor in many sectors of the economy.

When fuel prices rise, the cost of shipping goods can also rise. These cost increases can affect the production and distribution of food, the construction sector, delivery services and the daily activities of businesses in communities across the country.

Canada is a vast and geographically diverse country. Cars remain the primary means of transportation available to many Canadians.

They use cars to get to work, run their small businesses, take their children to school and activities, go to the doctor and travel between communities.

For farmers, truckers, business owners and many other workers, fuel is not merely a discretionary expense. They simply cannot earn a living or provide their services without it.

The effects are felt most acutely in rural, remote and northern communities, where distances are greater, public transit options may be limited and the cost of transporting essential goods is much too high in the first place.

Lower fuel costs provide direct relief to drivers while helping businesses and supply chains that are essential to Canadian households.

It goes without saying that no single measure will solve all the affordability challenges Canadians are facing.

Nor is the government presenting Bill C-38 as a comprehensive solution to those pressures.

Rather, it is a temporary, targeted measure designed to provide relief in an area that affects households and businesses across the economy.

As I said, the proposed extension is part of the government’s broader efforts to help Canadians keep more of their hard-earned income.

One of those measures is the income tax cut that the government gave 22 million Canadians by reducing the lowest marginal personal income tax rate from 15% to 14%, effective July 1, 2025.

This measure will provide tax savings of up to $420 for individuals and $840 for a dual-income family per year. Overall, the bulk of the tax relief goes to people with incomes in the two lowest tax brackets.

For households coping with the costs of housing, groceries, transportation and other essentials, this measure is designed to help them keep more of their income and better meet their day-to-day needs.

Another measure is the removal of the goods and services tax (GST) for first-time buyers of newly built homes valued at up to $1 million, along with a reduced GST rate for first-time buyers purchasing new homes valued between $1 million and $1.5 million. This tax relief could save eligible Canadians up to $50,000 and will help reduce one of the upfront costs faced by young people and families seeking to enter an increasingly challenging housing market.

On April 1, 2025, the government also eliminated the federal consumer carbon tax, providing direct savings to Canadians at the pump in most provinces and territories. On the same day, the government also removed the requirement for provinces and territories to implement a consumer carbon tax.

To provide additional support to more than 12 million Canadians, the federal government has introduced the new Canada Groceries and Essentials Benefit. It provides a family of four up to $1,890 this year and approximately $1,400 annually for the next four years, and a single individual up to $950 this year and approximately $700 annually for the next four years.

The government has made Canada’s National School Food Program permanent. It provides school meals benefiting up to 400,000 children each year. As a result, participating families with two children in school can save approximately $800 a year on groceries

What’s more, the government has introduced automatic payments of federal benefits starting with the 2026 tax year to help up to 5.5 million low-income Canadians file their tax returns and receive the benefits to which they are entitled by the 2028 tax year.

Honourable senators, these measures differ in their design and in the groups they are intended to benefit. Some provide broad-based tax relief, while others are more specifically targeted to families, first-time homebuyers, or low-income Canadians. Together, they demonstrate the range of tools available to address affordability pressures.

Bill C-38 is the latest addition to this suite of measures. It is targeted in scope, providing a temporary reduction of a federal tax on fuel that is used by individuals, businesses and critical supply chains.

The proposed extension is part of the government’s overall financial plan. The estimated financial cost of the extension will be approximately $2.9 billion, bringing the total estimated relief to $5.3 billion in 2026-27.

As honourable senators know, any measure aimed at supporting affordability must be considered in conjunction with its budgetary implications. Canadians expect governments to provide support when circumstances require it. They also expect public funds to be managed responsibly and transparently. The government states that Bill C-38 aims to balance these two priorities.

This legislation proposes special one-time relief to address specific economic circumstances. It does not propose a permanent change to the framework of the federal fuel excise tax in Canada. Rather, this legislation extends the full suspension of the tax until January 31, 2027, followed by a 50% reduction on regular rates until March 31, 2027.

The temporary nature of this measure is significant. It enables Parliament to fully understand both its duration and its estimated cost. It also recognizes the principle that temporary economic circumstances may warrant temporary policy responses.

Having examined this legislative measure and the reasons behind it, I believe that Bill C-38 offers a prudent and appropriate response to current cost-of-living pressures. This bill provides targeted, temporary relief, discloses costs transparently and takes current economic realities into account.

Honourable colleagues, to make life more affordable for Canadians, we must strengthen the Canadian economy. Affordability and economic growth go hand in hand. Immediate measures can help households cope with current costs, but any long-term improvement in the standard of living depends on increased productivity and investment, a strong labour market and competitive Canadian businesses.

To advance these priorities against a backdrop of growing global uncertainty, the government is building on Canada’s strengths, attracting investment and accelerating the delivery of major projects. For example, the government has taken steps to fast-track major projects of national interest through the Major Projects Office. These projects will help Canada build more, act faster and trade more with our international partners. The government wants to act on a larger scale, but with the same sense of urgency and the same efficiency, through the Building Canada Act.

When it comes to projects and supply chains, the stated objective is simple: one project, one assessment, one year. Together, these measures aim to improve Canada’s approach to investment. The objectives are to reduce the cost of investment, speed up construction, make more efficient use of public assets and make Canada more competitive through the tax system.

The government also plans to strengthen Canada’s economic and national security by investing $500 billion in defence, expanding Canadian shipyards, growing our aerospace industry and enhancing our cybersecurity capabilities.

Over the past year, the government has signed more than 20 trade and security agreements across five continents. Canadian businesses now enjoy duty-free access to 1.5 billion consumers.

The government describes Canada as one of the world’s best-connected economies. This access provides Canadian businesses with opportunities to win over clients from a vast range of international markets. This fall, Canada will be launching discussions with the European Union, the world’s second-largest economy, to deepen and strengthen their security and economic partnership.

The 2026 Canada Investment Summit held in mid-September laid the foundations for substantial new investment and strategic partnerships, while accelerating ongoing agreements, resulting in nearly $500 billion in new investment commitments across the country. During the summit, the government also announced new measures to make Canada more competitive in attracting major investments.

First of all, these measures include the new Productivity Mega Deduction, which allows businesses to immediately deduct a wider range of investments, including fibre-optic cables, mining assets, pipelines, railways, aircraft, manufacturing equipment and more. The government is also proposing to make immediate expensing a permanent feature so that businesses have the long-term certainty they need to make major investment decisions.

Thanks to the Productivity Mega Deduction, Canada’s marginal effective tax rate on new investments will be the lowest among all the world’s major economies and less than half that of the United States. Of course, these more long-term economic measures do not serve the same purpose as the temporary relief proposed in Bill C-38.

Investments in infrastructure, business capabilities, energy and productivity seek to strengthen the economy over time. Meanwhile, Bill C-38 seeks to address a more immediate concern, the impact of the high fuel and transportation costs that families and businesses are currently facing. These objectives are closely linked. Canadians need support to cope with the immediate pressures caused by these costs within an economy that can foster long-term growth, create well-paying jobs and generate the revenue needed to fund our public services.

In closing, the issue before us today is not to determine whether fuel costs are having an impact on Canadians. They are. The question is whether extending the temporary reduction in the fuel excise duty remains an appropriate and suitable measure to address these pressures.

Honourable senators, strengthening the Canadian economy is a long-term endeavour. The benefits of major investments, new infrastructure and expanded trade relations may take time to fully materialize. However, many Canadians are struggling with the pressures of the cost of living right now.

At this time of global uncertainty, Canadians are coming together to build a stronger, more independent, prosperous and affordable country — a country that benefits everyone.

Bill C-38 proposes a time-limited extension of the suspension of the federal excise tax on fuel, followed by a temporary reduction in the standard rates. The aim is to provide additional relief to households and businesses as broader efforts to strengthen the Canadian economy continue.

The bill proposes a targeted, temporary measure. It has a clearly defined fiscal cost, but it is intended to provide direct support during this period of persistent economic uncertainty. As senators, it is our responsibility to examine the proposed relief, its design and its budgetary impact.

This bill provides concrete relief, responding to current fuel and transportation costs while maintaining a clear deadline for the temporary tax reduction.

I encourage honourable senators to support the passage of Bill C-38 and the extension of the fuel excise tax relief for Canadians. Thank you, senators.

Senator Forest, would you take a question?

Yes.

First, thank you very much for bringing this important bill forward and for the role you’re playing in this process.

This initiative is filling a gap — if I can put it that way — in something that ended on September 8. In the ensuing days, there was confusion between the Canada Revenue Agency, or CRA, and the Canada Border Services Agency, or CBSA. The CRA said, “This is a proposal,” and the CBSA said, “We’re going to do this in January 2027.”

My question comes back to this: This bill has to pass in order to be applied retroactively to September 8. So, in the interim period, were taxes collected, as per the law today? How was that dealt with by the officials with whom you work in terms of obeying the law and collecting taxes, and where do we go from here?

Thank you.

Thank you for that very relevant question. As I said in my speech, the proposed extension will have a cost and we will see tax savings estimated at approximately $2.9 billion. However, since the total cost is estimated at $5.3 billion, that means that we have already collected the difference between $2.9 billion and $5.3 billion.

For clarity, they didn’t talk about any tax that may have been collected because of the confusion between the two departments. Were any taxes collected during this interim period?

Thank you for the question. I was unaware of any confusion between the two departments.

Thank you, Senator Forest, for your speech. Clearly, the official opposition agrees completely with Bill C-38’s objectives. It took a few years to persuade the government that reducing fuel costs was a good move.

At the same time, I think that the gas tax is unwarranted at the moment. As Canada faces a time of economic decline, Canadians are struggling with the higher cost of living, an issue directly affected by the cost of fuel.

Your government drew inspiration from the opposition’s ideas and we agree completely: It’s commendable. However, don’t you think it would be better for the government to offer Canadians a reduced rate for more than a few months? Wouldn’t it be better to extend the reduction to at least July 1, 2027, and possibly beyond, so that Canadians in need of relief can truly benefit in a more significant way than for only a few weeks or months?

Thank you for that comment. I think it’s valid. It’s my understanding that this measure, which was in place from April to September, was very temporary. In Bill C-38, the government saw fit to extend it at 50% until March 31, 2027. That tells me the government will adapt as the situation evolves and as major events lead to outcomes entirely beyond our control. One such event is the U.S. midterm elections.

I believe that this temporary measure is already being extended in Bill C-38, so we’ll see. Perhaps you’ll influence future decisions.

Sure, if it’s not too tough.

Was that a question, senator?

The question was more of a comment. Either way, Senator Gignac, I will pass on the message to the government.

Are senators ready for the question?

Is it your pleasure, honourable senators, to adopt the motion?

Hon. Senators: Agreed.

(Motion agreed to and bill read second time.)

Honourable senators, when shall this bill be read the third time?

(On motion of Senator Forest, bill placed on the Orders of the Day for third reading at the next sitting of the Senate.)