Jack Mintz: Are we taxing gambling too much? 

Like most “sin” taxes, gambling and online gambling taxes typically have two objectives: discourage harmful consumption and, of course, raise revenue to fund public services. Photo by Dan Janisse/Postmedia

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Last month, iGaming Ontario announced that gambling wagers from online betting in the province totalled an astounding $9.5 billion in June — almost $7,000 per active player account — yielding $400 million in net revenues that month. Since 2022, when regulated online gambling was introduced, the government has been more than happy to collect, on average, 20 per cent of gambling revenues for its budget. That will be close to $1 billion this year if current trends continue.

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It’s not the only way Ontario collects gambling profits however. The Ontario Lottery and Gaming Corporation, which operates lotteries, land-based gaming (e.g., casinos and horse-betting), and digital gaming earned over $9 billion in proceeds in its 2024-25 fiscal year, generating $2 billion in net profits for the province’s coffers.

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Overall, Canadian provinces and territories raised about $8 billion in the past year in “trading profits” from lotteries, casinos, sports betting and other gambling. These funds may be distributed to social causes, including health and community programs.

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According to the World Health Organization, global gambling revenues total US$650 billion, with three-fifths coming from gambling addicts, who are an estimated 1.2 per cent of the population. Salivating over gambling revenues, governments tax the gross revenues (bets minus winnings) earned by gambling operators at rates ranging from three per cent to 83 per cent. The average tax rate among EU countries is 21 per cent, which is close to the rate in Ontario.

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Some countries also collect sales taxes on gambling sales revenues, as our HST does. Or they may exempt online gambling from VAT, like the EU.

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Gambling can also be taxed using income taxes. In the United States, individuals are taxed on their gambling winnings minus the bet. An exemption is deducted from winnings and both cash and non-cash winnings are taxable. The intent of income taxation is not to discourage gambling but to tax all sources of income so that people with the same income pay the same tax, regardless of how they have made that income.

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The U.S. is the only OECD country that taxes non-professional gamblers on their winnings. Other countries tax gambling operators on their profits. Besides the complexity in taxing small payouts, the strongest argument for exempting non-professional gamblers from income taxation is that their expected gain from betting is negative.

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Gambling clearly has an ugly side: addiction and under-age betting. At a Munich conference I attended in April, Yale Professor of Psychiatry Marc Potenza showed some stark pictures of brain deterioration in gambling addicts. After interventions to curb addiction, however, the deterioration was reversed.