The following is Part V (Recommendations), Section 9 (Government Coordination, Collaboration and Programming), Subsection 4 (Horse Racing Industry) of report by Canadian Parliamentarian Dennis Mills, the Chair of the Sub-Committee on the Study of Sport in Canada. Among the recommendations, Dennis Mills suggests that the Minister of Justice amend Criminal Code paragraph 204(1)(c).
SPORT IN CANADA :
Everybody's Business
Leadership, Partnership and Accountability
Standing Committee on Canadian Heritage
Sub-Committee on the Study of Sport in Canada
Dennis Mills, M.P.
Chair
December 1998
Section 9, Subsection 4
4. Horse Racing Industry
Horse racing is a major sport in Canada and contributes significantly to the Canadian economy. Canada is respected around the world for its production of competition horses. The industry has recently come under pressure from new and expanded gaming initiatives including casinos, slot machines, lotteries and bingo (Racetracks Canada, brief).
Over the past 10 years horse racing has become quite widespread. In this more global market, one problem facing the horse industry is that Canadians are subject to tax-withholding on winning bets in a U.S. pool. This means a separate and smaller pool in Canada; many Canadians are setting up wagering with racetracks in the United States in order to bet into U.S. pools. This seriously hurts the Canadian racing industry because it means that wagering and associated commissions are lost to it.
Losses incurred by horse owners who are not full-time farmers are tax deductible only to a maximum of $8,500. These rules apply to "farms," as defined in the Income Tax Act, and were put in place to prevent "hobby farmers" from benefiting from artificial losses. The unintended effect of these rules is to put Canadian race horse owners and the Canadian horse racing industry at a significant disadvantage in relation to their U.S. counterparts and other Canadian businesses. This industry would benefit from having fair tax treatment, the same as that given to other businesses in Canada.
The emergence of new technologies has created opportunities for foreign competitors to advertise and offer betting facilities to Canadian residents that cannot be
offered by Canadian tracks. The problem is that the Criminal Code permits only telephone account wagering, so that the Canadian industry cannot benefit from other
mediums such as the Internet or digital satellite television to provide a modern wagering distribution system.
The Committee recommends that:
The Department of Finance undertake negotiations to change the current tax treaty between Canada and the U.S. to ensure that Canadian betting in Canada on races in the United States will be subject to the Canadian tax laws rather than U.S. regulations.
The Minister of Finance examine the possibility of amending the Income Tax Act so that the losses incurred by horse breeders and owners receive the same tax treatment as losses incurred by any other businesses in Canada.
The Minister of Justice examine the possibility of amending the Criminal Code paragraph 204(1)(c) to add the words or any other telecommunications devices after the words telephone calls. This would allow the horse racing industry to take advantage of emerging new technology to allow wagers directly into betting pools une seule fois au titre de tout l'élément d'actif hosted by Canadians tracks, over mediums such as the Internet or digital satellite television.
Estimated Costs of the Recommendations
The cost of amending the Income Tax Act needs to be established.Other recommendations would incur no additional cost.