Edwards/Giguère Testimony - 11/5/98 (Part 2)

25 May 1999

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    Mr. Yvon Giguère: I want to add to what Stephen referred to, when you have numbers of days in different locations. I think the industry is moving more and more to the simulcasting world, so that simulcast revenue will create the possibility of adding racing days or creating a racing season in different locations in rural Canada, as well as the metropolitan areas.

    Mr. Inky Mark: Another question deals with how you deal with technology. I understand there is a huge potential to market technology, racing technology. At the same time, can that become a threat to small-town racing?

    Mr. Stephen Edwards: It does not at all in the way we are structured in Canada. It could not become a threat to small-town racing. In Canada, we have designated home-market areas, and all betting and all wagering that is placed from that area accrue to that area. So whichever track would normally have gotten the revenue from a person betting in Coquitlam, British Columbia, they will still get the revenue regardless of the technology being used, or regardless which track he might be betting into. Those conventions are respected in Canada and in fact are laid down by various racing commissions and by our regulatory body, the CPMA.

    We have already established telephone betting, where anyone in Canada can bet, and the home marketing area agreements control how that revenue is distributed or how any profits from that wagering are distributed.

    Mr. Inky Mark: Thank you.

    The Chairman: Mr. Clouthier.

    Mr. Hec Clouthier (Renfrew-Nipissing-Pembroke, Lib.): Thank you very much, Mr. Chair, and thank you very much, Steve and Yvon, for being here today.

    As you well know, I've been involved in harness racing all my life, and my father before me. At one time I owned over 150 racehorses. The only trouble, Steve, was that many of them were about the same speed as my friend down here, Denis Coderre. They were more like Clydesdale horses instead of racehorses.

    But leaving all joking aside, you may not want to prioritize it, but I will. I believe the number one problem in our sport, and I say our sport because I'm still a licenced trainer, driver, owner, breeder, without a doubt is-

    The Chairman: Excuse me, Mr. Clouthier, after hearing all this I think we should duly declare your conflict of interest.

    Mr. Hec Clouthier: My wife wanted me to declare that when I was in Joe Fontana's riding last week and bought another horse.

    You're right. It is unbelievable, Mr. Chair, that section 31 of the tax act, where you had a $5,000 restricted farm loss, was only jumped up to $8,500 in 1987. That is incredulous, because coming from the field of business, you show me anything else- If you bought a truck in 1952 and buy that same truck in 1998, the price may be a hundredfold different. In my estimation, this is the number one problem with drawing new ownership into our sport.

    I bought two horses down in Harrisburg for a total of $190,000. I can't write that money off? That's ludicrous. It's because of the restricted farm loss. So I personally believe that should be raised to at least $50,000, or go to the same as you do in business and have a 15% tax write-off on your investment.

    It's not costing the government anything, Mr. Chairman. Am I getting you in hot water here? Finance Minister Martin will be yelling at me. But that is the number one problem.

    You know well, Yvon, the average sale this year for the yearlings at Blue Bonnets is around $20,000. At the Canadian standardbred horses sale, it was around $26,500. By the time those yearlings get to the market they have another $15,000 invested into them through training and stake payments, and they can only write off $8,500. It doesn't make sense to me.

    With the VLTs you're absolutely right, without the video lottery terminals and simulcasts harness horse racing, and even thoroughbred racing in this country, is dead. We needed that. That is exactly what kept the industry alive. As you well know, down in Dover Downs in Delaware the purses are now $10,000 a race. Why?-Because of simulcasting and TV betting.

    The television betting is a key, and, Steve, I didn't realize until now, but I guess I should elucidate and tell you that I'm working with the minister of justice right now, and we should get together on it, for the Ontario Jockey Club to have betting, television betting, which is a key down the road for our sport.

    So maybe I have statements more than questions.

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    You're right about Ladbroke. They take payments in Europe and the United States, where our money is going.

    Mr. Giguère, one moment please. The Giguères are probably the family that is the most involved in this sport throughout Canada and perhaps even in North America. Mr. Giguère's brother is currently race secretary at Blue Bonnets, a Quebec racetrack. His father is in the Hall of Fame and is an extraordinary judge, and his uncle, Georges, is also in the Hall of Fame.

    So if we had more families like the Giguère family involved in horse racing, we wouldn't find ourselves in the trouble we're in today.

    The Chairman: Thank you very much.

    Now that we have heard from our third witness, I will hand it over to Madame Tremblay.

    Ms. Suzanne Tremblay (Rimouski-Mitis, BQ): Thank you, Mr. Chairman. You took the words out of my mouth. I was even going to ask you to put the ribbon back where it was before he began to speak. But let's start over again. Enough joking.

    Let's go to page 11 of the French document. I would like to get back to the question my colleague Mark had broached. It's on page 10 of the English document, regarding the wording that you want added to the legislation.

    You say that this would have advantages for the industry and you cite four. One would be an advantage for Canada; it "would help the government in its fight to reduce the opportunity of crime, particularly illegal bookmaking."

    How does access to betting through the Internet, by satellite or by digital television prevent or reduce crime in illegal bookmaking? I don't see the link between the two.

    Mr. Yvon Giguère: Ms. Tremblay, right now, bookmakers outside of Canada who operate in Canada contribute no taxes whatsoever and do not participate in the pools created in each of the Canadian racetracks. Therefore, no taxes are raised, be they federal or provincial. Even the part that does benefit the association, which allows us to produce the show, is taken away from us by these people who engage in illegal activity.

    Ms. Suzanne Tremblay: If someone is capable of placing a bet with an illegal bookie, it's because he knows that that bookie exists. If his existence is known and this is against the law, why isn't he arrested?

    Mr. Yvon Giguère: You are referring to action that the government could take, but does not take.

    Ms. Suzanne Tremblay: But the current legislation would allow it.

    Mr. Yvon Giguère: The law would allow it, but it is very difficult to identify individuals who commit this crime. It's not up to the racing industry to do that for you.

    Ms. Suzanne Tremblay: No, I understand.

    Mr. Yvon Giguère: We're asking that an opportunity be offered and that Canadians be allowed to bet in a legal way, within Canada, on the racetrack pool. We would increase pools because of the new bettors.

    Ms. Suzanne Tremblay: If I understand that reference to the 30 percent, you want us to amend the treaty between Canada and the United States so that Americans who bet in Canada are not taxed, or is it the reverse?

    Mr. Yvon Giguère: It's the reverse. Right now, an American citizen who bets on races in Canada is not taxed.

    Ms. Suzanne Tremblay: You want him to be taxed.

    Mr. Yvon Giguère: That's not what we want. We want to see a Canadian citizen who wants to bet on American races not have his gains subject to American taxes. When the bet is placed in Canada, it is immediately struck with a provincial tax, a federal tax and a fee for the association that accepts the bet. That's the reality we're denouncing here: we in Canada are taxed as soon as the bet is placed-

    Ms. Suzanne Tremblay: But not on the gains.

    Mr. Yvon Giguère: -and not on the gains, whereas in the United States, people are taxed on the gains.

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    If the betting activity takes place in Canada, for the benefit of Canadians, we want this activity to be taxed in Canada and subject to the Canadian rules and regulations. We don't want the gains of Canadian betters taxed at source by the United States. Since the source of the bet is Canadian, the gains should not be taxed in the United States.

    Ms. Suzanne Tremblay: Yes, but that's the approach of the Americans. All lotteries are taxed in the United States, every single one, whereas here, lottery winnings are not taxed. Those are two different approaches. I don't see how we can ask the Americans to amend their legislation.

    Have you asked for a legal opinion with a view to going before the WTO to see whether the Americans are entitled to do that? We criticize the Americans for having passed the Helms-Burton Act. How can we ask them to change their legislation? I don't see how we could tell the Americans not to tax gains. That's their business.

    Mr. Yvon Giguère: I just want to point out that there are three countries that are subject to that tax: Canada, Mexico and Australia. If a French better bets on American races, he doesn't have to pay those taxes. We're talking about a global market, but Canadian betters are confronted with- Let's take the example of a race that will take place this weekend, the Breeders' Cup. Frenchmen who bet on this race, in the American pool, will not have to pay taxes to the Internal Revenue Service, but Canadians who do the same thing have to pay taxes there. So in a world market, Canada, Mexico and Australia are in an unfavourable situation compared to other foreign countries.

    Ms. Suzanne Tremblay: Since we have a treaty between Canada, Mexico and the United States, there might be a way to- Have you met with the minister responsible for NAFTA to ask whether something could be done that way?

    Mr. Yvon Giguère: I think that our presence before this committee is a first step toward these kinds of representations.

    Ms. Suzanne Tremblay: Thank you.

    The Chairman: Thank you, Ms. Tremblay.

    Mr. Yvon Giguère: Allow me to get back to the issue of sports. There's a lot of talk about money and the industry, but this is a sport for die-hard fans and as far as racing is concerned, Canadians excel throughout the world. In harness racing, especially, Canadians have a great reputation and are on top of the list with the United States. One could state the names of Luc Ouellette and Michel Lachance, who represent Canada in an extraordinary way in the United States.

    The Chairman: Thank you, Mr. Giguère.

    Mr. Coderre.

    Mr. Denis Coderre (Bourassa, Lib.): I won't reply to what my colleague said about me earlier, Mr. Chairman. I thought he'd taken steroids. I will calm down. Perhaps we should have antidoping tests before we come in here and sit down, Mr. Clouthier. Maybe that would explain certain things. I'm sure that horses are not subjected to steroids.

    What interests me is the situation of Hippodrome de Montréal. I won't repeat the whole issue of the contract and links with the City of Montreal and what this seems like or should be like. Rather, I will talk to you about the men and women in the racing world, because I have met with them on a few occasions. Mr. Giguère, we can talk about sport, but we also have to think of the animals. We must also think of the jockeys. I think we have to examine the situation.

    I'm a neophyte and I'm not familiar with this whole phenomenon. One single time I bet $2, but I won. I'm not a gambler, but I know that this is an important industry that creates jobs and contributes significantly to Montreal's economy. Incidentally, it's too bad that when the Montreal Casino appeared, there were regrettable incidents that could have led one to believe that there were things happening at the Hippodrome de Montreal that were not quite kosher, when that was not the case. At one point, when an attempt was made to empty the enclosures and the police entered, we got the impression that this was staged rather than reality. I think that horse people are honest. I don't see problems where none exist. We often get the impression that the animals are injected and so forth. I think that veterinarians and people in the horse world respect their animals and do excellent work. Let me close that parenthesis.

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    One gets the feeling that in Montreal, there are problems in the relationship between the horse people and the management, and that there's a lot of raiding, especially to send owners to Toronto and Vancouver. Apparently some were even prepared to pay all their expenses. They're paid for six months in advance and if it doesn't work in the end, no problem; they pay for the return to Montreal.

    There's also a lot of talk about that notorious enclosure rental contract. We hear that there was an agreement that should have been respected and has not always been. I would like you to elucidate the situation of the Hippodrome the Montreal. If you want us to help you, there has to be transparency and there especially has to be an harmonious relationship between the people in the horse world and the situation of the hippodrome.

    How are things going in Montreal in that regard? Is this settled? I must admit that when I visited these enclosures, it looked like Sarajevo. It was full of holes and there were areas that were not sanitary. I know that you will invest money in this eventually. First of all, have relations improved in this regard and secondly, will the facilities be adequate for people in the horse world?

    Mr. Yvon Giguère: Mr. Coderre, in your preamble, you referred to unfortunate incidents that took place in December 1991, where the integrity of the games that took place in Montreal were called into question. After this police intervention, no charges were laid in court. Therefore, no charges led to any conviction. As far as that's concerned, time heals all wounds and public confidence has been restored.

    You say that the people in-

    Mr. Denis Coderre: Perhaps the casino strike helped restore the balance. There's also the fact that you have more video poker games. We agree on that.

    Mr. Yvon Giguère: We do agree on that. Competition in the gambling industry is fierce. New sectors have been introduced. During the 1993 strike, the Montreal Casino opened. The Hippodrome de Montréal had enormous financial difficulties after the opening of the Montreal Casino, which is a very important competitor.

    However, we must underscore the intervention of the provincial government which enabled the Hippodrome de Montréal to continue its operations and establish a plan for the future that will give Montrealers a horse-racing centre. We're talking about an investment of $25 million on the site. There will therefore be a radical change in the area that, as you put it, looks like Sarajevo. We want to create an immense racing centre for Montrealers and all Quebeckers where there may be green spaces and pedestrian trails. People will be able to visit the renovated facilities. This is a significant intervention by the Government of Quebec for the Hippodrome de Montréal. Of course, this does relate to the 4,000 jobs at the Hippodrome de Montréal and all the economic activity that it generates.

    Mr. Denis Coderre: You talk like a politician. How are things going with the horse people?

    Mr. Yvon Giguère: No doubt you're asking us to discuss the negotiations. There are negotiations going on between the horse people and the hippodrome management with a view to coming to some agreement concerning a contract. We're talking about significant gains for the horse people in terms of the purses, the injection of new revenue for the purses that are paid out to the owners. These revenues will come from various sources: simulcast activities, activities outside the hippodrome and other fields of activity and an improved purse fund for these horse people, which will create better conditions.

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    We also want to make changes at the site. We want a world- class raceway in Montreal. We want Montreal to regain its status as an international raceway, a status it lost in the past few years. The creation of a new 7/8th of a mile race track will allow us to hold international events. We want to be a Canadian leader in presenting international events.

    The Chairman: Excuse me.

    Mr. Matthews, did you have a question? No? Then I will go to Mr. O'Brien, and that will be our last question, as we have tight time constraints today and we still have more witnesses.

    Mr. Pat O'Brien (London-Fanshawe, Lib.): Thank you, Mr. Chairman.

    I don't have a lot of experience in this industry other than a few years on the Western Fair Raceway board. In fact that Western Fair Raceway is in the riding of my colleague, Joe Fontana. But I know they certainly have their problems, as all the tracks do.

    I have a couple of factual questions that I didn't see the answers to here. I guess it's 37 tracks in total that I see on your list here. If you just treat the racing by itself, how many of those tracks in Canada lose money?

    Mr. Stephen Edwards: It's difficult to say. I have no financial statements from the tracks. A number of the tracks, for instance, are agricultural societies or cooperatives between the horse people and the tracks. I can tell you that a number of tracks have closed.

    Mr. Pat O'Brien: Thank you.

    As to the other question, then, factually, because it relates to one of your issues on the use of communications, do you know what percentage of the bet at the tracks annually in Canada is simulcast as opposed to live? Have you a percentage breakdown there?

    Mr. Yvon Giguère: I can talk about the figure for Montreal as a racetrack: 65% of our business is simulcast, and 35% is revenue from our live product.

    Mr. Pat O'Brien: Do you think that would be consistent across the country?

    Mr. Stephen Edwards: It's consistent, probably a little less, in the area of 60-40. The reason for that is with some of our climate a number of tracks don't race through the winter but they continue to offer simulcasting. But I should point out that the simulcasting revenue stays with the track.

    Mr. Pat O'Brien: Right, yes.

    Mr. Stephen Edwards: Only a small percentage is paid to the track that originates the race. All of the remaining money is treated as though the race were held on that site.

    Mr. Pat O'Brien: Thank you.

    Lastly, is there any provincial involvement in any of the actions you're seeking, or is it strictly- I was under the impression that there's quite a bit of provincial involvement in the horse racing industry in Canada. Are all of these areas in which you're looking for help totally federal jurisdiction? That's my question.

    Mr. Stephen Edwards: Thank you for the question, Mr. O'Brien.

    Yes, the issues we have brought here today are issues of a federal nature. We have tackled a number of issues with the provinces where, in general, they have seen it fit to reduce the amount of tax they have taken out of racing, and so on, basically right across the country. There are a few exceptions.

    The issues we have brought are all federal. Racing and wagering in Canada is regulated by federal statute, and as you know, certainly the Income Tax Act is federal. The other two issues are federal statutes.

    Mr. Pat O'Brien: So it's totally federal.

    Okay then, thank you very much for that information. I appreciate it.

    The Chairman: Mr. Edwards and Mr. Giguère, we appreciate you coming before us today. You've given us some good suggestions, good ideas. I think a number of us didn't realize the number of people who are employed in your industry. It's a huge industry in terms of job creation. We will deliberate over the next few weeks and consider your recommendations, and we'll go from there. So thank you very much for coming today.

    Mr. Stephen Edwards: Mr. Chairman, thank you for being here. And members, thank you for the questions, which were very helpful.

    The Chairman: Colleagues, I think we should move right on to our next witnesses, because I know we're working against the clock today and we're running a little bit behind.

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