Ontario Online Gambling Will Result in 2 Billion in Lost Tax Revenues
The Premier of Ontario, Doug Ford, and his government are preparing to open the province up to regulated online gambling. And while this has been met with praise by the iGaming industry, warnings have been given by analysts regarding the potential financial impact of it. According to some, the province and its municipalities could end up losing out on millions of dollars of revenue every year. This is the conclusion of a new report by a gambling industry consulting firm, which was obtained by CBC News, prepared for Great Canadian Gaming: a company that possesses the largest share of the brick-and-mortar casino market in Ontario.
Even though the province will have a new source for revenue coming in, thanks to the taxation of regulated online gaming sites, the report provides a negative look into the future. According to it, Ontario is likely to end up losing out when it comes to revenue, rather than gaining from it. Within the report, a big shift in spending from land-based casinos to online gambling is expected, and it is this that analysts suggest will impact revenue figures. But how can this be possible considering it is a second stream of funds? And would it really see Ontario suffer revenue losses?
Lower Tax Rate for Online Gambling Sites
The tax rate for online gambling sites in Ontario is expected to be much lower than the amount that the government takes from casino spending. And because of this potentially being the case, the province has been predicted to lose out on $550 million (US$440 million) every year, equating to a total of $2.8 billion (US$2.23 billion) over a five-year period. In comparison, the revenue that Ontario generated from its lottery and gambling prior to the global pandemic was as much as $2.5 billion (US$2 billion). Yet despite the figures predicted by some analysts, the companies which are involved within the online gaming scene have stated that the report is flawed.
The primary issue that these companies have with the report is that there is a key assumption involved which underpins it. That assumption is that existing casino customers will randomly and suddenly start spending less of their funds within physical casinos and utilize more of it online instead. Yet this begs the question as to why they would do this when online gambling platforms are already available to them now.
Jeffrey Hass, who operates as the senior vice-president of the DraftKings Inc. brand, had the following to say about the report:
When the regulated market opens in Ontario, nothing is going to change in respect to players’ entertainment habits. People who are playing in online casinos and online sportsbooks and online poker rooms will continue to do so, except they’re going to go from playing offshore to onshore.
The VP of DraftKings, which currently provides online sports betting and casino products to various states across America including locations like West Virginia, Pennsylvania, and Michigan, went on to mention that people who currently visit land-based casinos will most likely continue to do so as well.
Yet, Haas found himself being contradicted by the Great Canadian Gaming CEO, Tony Rodio. In a statement published, he said that the report had included “critical learnings from other jurisdictions that introduced iGaming,” which he went on to say had “cannibalized” their land-based operations at the same time. Rodio was quick to point out that while Great Canadian Gaming supports the iGaming scene in principle, it is something that the government of Ontario needs to get right.
The Private & Confidential Report
Despite the fact that CBC News managed to obtain and reveal the contents of the iGaming report by HLT Advisory Inc., it was labeled as “Private & Confidential.” Submitted on Jan. 11 and given the title of “Ontario Gaming Market Assessment,” it pointed out that the “open license” proposal by the government with regard to e-gaming would result in online sites managing to go beyond triple their current share of the overall gambling market in the province, which is estimated to stand at around $7 billion (US$5.6 billion) per year.
The report based that conclusion primarily on the data coming from the United Kingdom. When it opened its online gambling market by bringing the Gambling Act 2005 into effect, large numbers of players turned to that scene for their gambling activity. The rules of the licensed U.K. market are regularly updated so as to fit a more modern and digital gambling landscape in the UK.
As things stand at the moment in Ontario, land-based casinos operating there have to hand over 55% of their net gambling proceeds in tax. For the time being, Ford’s government have yet to make an announcement on the percentage tax rate that regulated online gambling sites will need to submit. However, within the report from HLT Advisory Inc., it assumes that a 20% levy will be brought into effect, and industry sources have suggested that this is probably accurate.
Ontario Gamers Spend Around $1 Billion on Online Gambling Already
The effects of the COVID-19 pandemic have been felt around the world, with land-based casinos taking a big hit. This has been true within Ontario as well, with gaming establishments being shut down for months on end. And then when they were given permission to re-open, capacity limitations were imposed on them. With the addition of travel restrictions at the borders, casinos in locations like Niagara Falls and Windsor were unable to benefit from the usual influx of U.S. gamblers.
Ontario has restrictions in place once again as of Jan. 3, meaning that those same casinos are shut down as a result of the coronavirus Omicron variant.
It has been suggested that Ontarians spend around $500 million (US$395 million) every year on internet gambling, and the majority of that is spent at offshore casinos – those that operate outside the province. The provincial government, on the other hand, puts the same figure at $1 billion (US$799 million) every year. Platforms like PokerStars and Bet99 promote their services to players based in Ontario, and there is nothing in place to stop gamblers from the province from registering and gambling at those sites.
It was in July of 2020 that the iGaming Ontario agency was announced. This was created so as to oversee all online gambling provided by companies that enter into agreements with the province.
The Minister of Finance, Peter Bethlenfalvy, says that e-gaming is yet to be incorporated into its financial projections, although more information may be provided in the next budget. A spokesperson for the ministry, Scott Blodgett, said that a competitive market will hopefully be established for online legal gambling, and this will “reflect consumer choice while minimizing the risks to consumers” who play at those platforms.
He went on to state that the iGaming market in Ontario is being developed so as to co-exist with the land-based gaming sector and not so that it will detract from the current revenue being generated. Whether or not the revenue will be burnt into by the launch of the regulated online gambling market in Ontario remains to be seen.
”Drawing comparisons from different markets in different jurisdictions” isn’t likely to be an accurate way of figuring out what will happen once the iGaming market launches in Ontario, according to Paul Burns, president of the Canadian Gaming Association. He noted that online gaming is already present in the province. “It’s just not regulated, it’s not controlled. It’s not put to the same regulatory standards the casinos are held to,” he commented.
Current Available Options for Ontarians
Players based in Ontario have long been able to access offshore and out-of-province platforms to engage in online gambling activity. And various platforms still exist that provide their services to this market. Fortunately, many of these are highly competent and reliable sites, which we can also recommend to you as a gambler. Simply browse through our guide to playing online poker and other gambling activities in Canada for more information.