Experts express concern over high taxation on sports betting.
The taxation aspect of the proposed legislation concerning the regulation of sports betting in Canada is a contentious issue that sparks disagreement among stakeholders.
The pending legislation in the Senate proposes a tax rate of 18% on the Growth Gaming Revenue (GGR) for betting establishments seeking to establish themselves in Canada.
There is also a planned taxation of 30% on the profits of individuals, with exemption for amounts below $ 2,211. A 30% tax is anticipated to be imposed on the earnings of individuals, granting exemption for amounts lower than $ 2,211. Individuals are expected to face a tax rate of 30% on their gains, with an exemption provided for sums below $ 2,211. Profitable gains made by individuals are set to be taxed at 30%, while those below $ 2,211 will be exempted. A taxation of 30% is projected to be implemented on the gains of individuals, with a waiver granted for amounts not exceeding $ 2,211.
The initial plan of the federal government was to impose a 16% tax on bets based on the GGR, but the approved rate in the Chamber was higher due to the increase in the anticipated allocation to the Ministry of Sports, which was 1% in the MP and rose to 3% in the bill.
In addition to the GGR tax, BETTING SITES will be required to pay all other taxes that any Canadian company pays, including PIS, Cofins, and ICMS. These additional financial obligations are in line with the regular tax requirements imposed on businesses operating in Canada. It is a standard practice for companies to contribute to the country's economic development through the payment of various taxes, ensuring that they fulfill their responsibilities as contributing members of the business community. By fulfilling these tax obligations, BETTING SITES contribute to the overall growth and stability of the Canadian economy, supporting the provision of public services and the well-being of citizens.
Udo Seckelmann, a sports and betting law expert at Bichara e Motta law firm, anticipates that taxation is likely to exceed 30%, excluding the licensing fee that companies will have to pay in order to operate within the national territory. According to Seckelmann's analysis, the tax burden is expected to surpass the aforementioned threshold, burdening businesses in the industry. Additionally, he highlights the necessity for companies to comply with the outlay fee, further adding to the financial strain they will face when establishing their presence in the country. As a result, companies involved in sports and betting will need to carefully assess the economic implications of these additional costs when considering their entry into the Canadian market.
Experts are concerned that the high tax burden on both companies and bettors could hinder revenue collection and contribute to the growth of an illegal gambling market. There is a growing worry among specialists that the excessive taxation imposed on both gambling operators and punters could impede the generation of funds and inadvertently foster the expansion of an unregulated betting industry. The concern shared by experts revolves around the potential disruption in revenue generation and the inadvertent facilitation of a black market for gambling activities due to the burdensome taxation imposed on both betting enterprises and individuals engaging in such practices. It is the apprehension of industry experts that the exorbitant tax rates imposed on both gaming operators and gamblers may impede revenue collection efforts and inadvertently contribute to the proliferation of an illicit betting marketplace. The primary concern among specialists is that the disproportionately high tax burden placed on both companies and bettors might obstruct the collection of funds, consequently encouraging the growth of an unregulated gambling industry.
High Tax
According to Udo Seckelmann, the maximum tax rate was set in the bill due to a bias, as well as a certain desire for potential revenue in a multi-million dollar market.
The lawyer believes that imposing a high taxation is not the optimal approach to foster a sustainable market. In his perspective, the preferred tax rate on GGR should hover around 10%. Creating a sustainable market, according to him, does not lie in implementing exorbitant taxes. Instead, a more reasonable tax bracket of approximately 10% on GGR would strike the right balance.
If we look at other countries, when a very high taxation is established, operators either leave the country because it is difficult to have a profitable operation, or they don't even enter the country.
According to the specialist, the longer it takes for regulation, the higher the likelihood of a tax rate increase, as the politicians involved in the process strive to allocate funds to additional sectors. As time elapses, the chances of an uptick in the tax rate rise, given that the politicians engaged in the procedure endeavor to allocate resources to a broader array of domains. The expert opines that the delay in regulation augments the potential for a surge in the tax rate, as the officials implicated in the proceedings aim to allocate funds to a wider range of sectors. As the duration extends, the probability of a rise in the tax rate escalates, owing to the politicians involved in the process seeking to channel resources to more areas.
He also positions himself as opposing the taxation proposed for gamblers, which follows the rate of prizes paid in lotteries.
"I am opposed to the 30% tax; I believe that the gambler should be taxed as a stock market investor, taking into account the actual profit. This would be ideal, always balancing out any losses incurred. However, it is highly unlikely to happen at this stage of the game," he says.
According to tax specialist Justin Fisher, in the assessment, the government should consider a decrease in tax rates once the country's fiscal situation has stabilized. It is advisable for the authorities to conduct a thorough examination of the possibility of reducing the levies once the economic stability has been achieved, as suggested by the expert in accounting, Justin Fisher. The government ought to explore the option of lowering the rates once the fiscal condition of the nation has reached a state of stability, as recommended by Justin Fisher, an expert in taxation. Justin Fisher, an expert in tax matters, highlights the importance of the government contemplating a reduction in the tax rates once the fiscal situation of the country is on solid ground. According to Justin Fisher, a renowned specialist in taxation, the government should carefully consider the possibility of reducing the tax rates once the fiscal situation of the country has stabilized.
I believe that the government's intention initially is to make up for the losses incurred by not taxing earlier. I also think it is quite possible that once the accounts are properly "adjusted," there could indeed be a reduction in taxation, according to the evaluation.
The Risk of an Illegal Market.
He emphasizes that high taxation can benefit the illegal market, as bettors seek to avoid taxes and regulated BETTING SITES will need to decrease the odds to maintain profit margins.
In Canada, bettors have two options when it comes to placing bets: either they try to keep their bets below $ 2,111 or they turn to the illegal market if they wager larger amounts. By doing so, they can avoid paying taxes and potentially get better odds.
Justin Fisher also emphasizes the importance of recognizing this risk.
There is a concern about promoting illegal gambling, fraud, money laundering, and also about deterring companies that would invest in Canada, as other countries have lower taxes.
Discussion in the Senate
Taxation is one of the contentious issues that may undergo modification when the bill is debated in the Senate. Market entities in the gambling industry are engaged in discussions with Congress in an effort to decrease the rate of tax on GGR.
UNDERSTAND: If there is any change in the text during the Senate vote, the bill will have to return to the Chamber of Deputies before proceeding to presidential approval.
Udo Seckelmann believes that there should be a reduction in the tax rate, possibly reaching 12%.
Research indicates that in order to have a successful plumbing system, it is necessary to allocate approximately 15 to 20% of the Gross Gaming Revenue (GGR) for plumbing expenses. In Canada, the plumbing allocation stands at 18%, inclusive of all taxes, resulting in a tax burden exceeding 30%," he estimates.
In an interview with MyBetInfo Canada, Senator Angelo Coronel expressed his intention to focus his efforts on this matter during his tenure in the Senate.
"I will strive in the Senate to lower the tax rate, in order to increase the number of players. By increasing the player base, we can expect a boost in revenue. It makes more sense to decrease the tax rate and attract more players," he justifies.
