It’s long been said that there are two unavoidable events in life: death and taxes.
While this may only be partly true in the case of the latter – many people and corporations do their level best to avoid paying tax – it’s certainly the case that it’s a subject that occupies the minds of many people.
One only has to look at the importance that promising to cut taxes generally has in any political party’s election manifesto to see this.
Broadly speaking, people split into two groups. The first see no reason why they should be taxed so heavily, believing that corporations should bear the heaviest burden. Others recognise that it’s taxes that pay for everything from building roads to providing state-funded education. Ironically, it’s also taxes that pay for the government machine that is essential for running the country.
Over the past few years an increased number of provinces have opened up their gambling laws. Provinces such as Ontario, Quebec and a prime example being Alberta online casinos has raised the question around taxation. Canada is essentially known for its higher takes rates overall so on a more ethical level, the paying of taxes signifies something else entirely. The individual’s or the corporation’s investment in society, giving them a genuine stake in both how it is run and a right to have their opinions taken into consideration.
The prospects for Alberta
Ontario undoubtedly leads the way when it comes to gambling in Canada. That’s because it broke the traditional licensing model for gambling operators with the establishment of iGaming Ontario. So, instead of only government-run operators being given licences, this allows private companies to apply and operate 100% legally there.
Alberta aims to follow their lead, and it is expected that by 2026 it will have launched its own regulated online gambling market. The government minister Dale Nally laid out the plans back in June 2024, but the legislation will take some time to pass through all the stages needed before it becomes enshrined in law. It is generally agreed that gambling has already provided many benefits for Alberta, not least the CAN$150 million that the Alberta Lottery Fund distributes every year to charities and other good causes.
The prospect of the government being able to partner with private operators in the future means that tax revenue is sure to follow, providing even more money to do good in the community. Some may wonder what the need is to formalise arrangements given the profusion of Alberta online casinos operating at the current time. The answer, beyond allowing tighter regulation, is that it will generate more tax revenue as currently none is received from these operators.
Why increase the tax the gambling operators pay?
In Ontario the regulated gambling market has led to the tax situation being clarified to a certain extent. The applicable taxes that are payable are the Goods and Services Tax and the Harmonised Sales Tax. The same is set to apply in Alberta.
Some feel that the rates should be set comparatively highly for operators for a couple of reasons. The first is the high profitability of the sector thanks to the business model that all but ensures that the casino or sportsbook always wins.
Higher taxation also sends out the message to the operators that they are in a strictly regulated environment, hopefully encouraging responsible practices and behaviour.
And why reduce it?
On the other hand, there are also sound arguments for taking a softer-touch approach to the taxing of gambling operators.
In a world in which many more markets are starting to open up for online gambling there’s a level of competition developing. Operators are looking for the countries with the most lucrative markets. Ones where there is potentially large customer base, a relatively low cost for the purchase of licenses and an equally low tax burden to shoulder.
Of these, it’s the tax level that is probably the most significant in shaping decisions for operators. Because once they are established and up and running profits are guaranteed and the less tax, they need to pay on them the more attractive it will be.
Creating a tax-friendly environment has other knock-on effects too. It potentially creates employment opportunities not just for the operators themselves but for the ancillary services around them.
How the rest of the world taxes
Looking around the world, there are wide variations of the amount of tax that gambling operators are required to pay.
For example, in Italy casinos only have to pay 1% of their gross revenue while in the UK it can be up to 40%. On the other hand, Singapore sits somewhere in the middle at an average of 20%.
So, Canada has fairly wide scope when it comes to setting its official level. But general advice would probably to be closer to the Singapore example if that sweet spot of encouraging operators to set up business and raising good levels of revenue is to be achieved.