Ontario to Open Its Doors to Online Gaming—But At What Cost?

by Ralph Trayfalgar Updated:

A great amount of potential exists with online casinos in Ontario. Opening the market would provide benefits to operators and customers alike, but it would also provide a significant boost to the province's tax collection. While all of this appears to be positive, a recent report commissioned by Great Canadian Gaming, the largest casino operator in Ontario, warns that the government might lose millions of dollars in tax revenue through the potential implementation of their online gambling law. 

Potential revenue loss from online gambling law

iGaming Ontario was established as part of Ontario's preparations for the introduction of new online casinos in the Canadian region. The organization is responsible for managing and conducting the internet gaming activities supplied by licensed operators. The specifics of the Ontario Gaming Market Assessment, a report published by HLT Advisory Inc., were made public by the CBC earlier this week. According to the whitepaper, the province stands to lose more than C$2 billion over the next five years.

For context, land-based casinos in Ontario are currently subject to a 55% tax rate on net gaming income, according to the province's taxation code. The tax rate for online gaming activity, on the other hand, has not yet been determined by the government. The Ontario Gaming Market Assessment draws its conclusions on potential tax revenue from online gaming activities based on an assumed tax rate of 20%. If this 20% tax rate ends up in the final law, the provincial government could stand to lose around C$550 million ($474 million) each year in revenue—a loss of over C$2 billion over five years. Customers transferring from land-based casinos to online casinos, according to the whitepaper, will be the source of the losses.

In other words, while the online gambling sector will bring in new money for Ontario, the research cautions that if players shift their attention away from land-based venues and toward online operators, the government would suffer losses as a result of the lower tax rate.

Casino report’s credibility in question

Because the paper was commissioned by Great Canadian Gaming, however, iGaming businesses have already questioned whether the recommendations included within it are trustworthy. According to Jeffrey Haas, the Senior Vice President of DraftKings, the top US-based online sports betting company, not much will change in terms of the gambling behaviors of Ontarians once the law goes into effect.  Haas believes that gamblers who prefer playing at land-based venues in the first place will likely continue to do so; the only difference here being that online gamblers who previously played on offshore sites such as Party Casino Canada, would be encouraged to move onshore instead, which would be a net positive for the provincial government.

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