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The Ontario government intends to introduce legislation that would, if passed, temporarily cut the gas tax by 5.7 cents per litre and the fuel tax by 5.3 cents per litre for six months beginning July 1, 2022.

This proposed tax cut would be effective July 1, 2022 to provide the industry — including gas and fuel tax collectors, registered importers, wholesalers and retailers — the required time to adjust their systems and business processes. This implementation time is required because of the way gas and fuel taxes are paid to the province, which includes pre-paid taxes.

How does the pre-paid tax system work?

Gasoline and fuel tax is imposed directly on consumers. To facilitate the collection of this tax, an amount equal to the tax is prepaid to the Ministry of Finance by designated collectors and importers. This amount is then included in the price paid by wholesalers and retailers. The consumer pays the tax at the pump, which offsets the amount the retailer pre-paid to its supplier.

If the legislation is passed and the rate decreases on July 1, 2022, importers, wholesalers and retailers that hold tax-paid inventory at the time of the rate cuts would be required to take inventory to receive a credit in the amount of the difference. Consumers would be charged the lower tax rate beginning July 1, 2022.

In this instance, the Ministry of Finance would provide a tax adjustment for registered collectors and importers to reimburse them for the adjustment they will provide to their retailers.

How is the government working with the industry?

Upon introduction of the legislation, the Ministry of Finance will immediately begin work with the industry to ensure they understand their proposed role and responsibilities in delivering the proposed tax cuts. If the legislation is passed, the industry would begin its implementation work.

The Ministry of Finance will be hosting outreach sessions in the coming weeks to educate and work with the industry on delivering this proposed tax change.

Additional Resources