U.S. Tax Incentives Crippled Canadian Horseracing
The number of empty horse stalls inside the stables that line Toronto’s historic Woodbine Racetrack is increasing.
Three years ago, Woodbine Racetrack was home to roughly 1,900 horses. That number is now 1,600 and dropping fast, as Canadian breeders, thoroughbreds and buyers gallop south of the border, lured by U.S. tax breaks that are beginning to decimate Canada’s industry.
Industry leaders say it is leading to fewer horses, races and jobs, which means less investment on Canadian soil.
“You have this big elephant down there, with its big magnet down there, pulling capital out of our country,” said Mark Halloran, managing director of the Canuck Racing Club.
The culprit is a tax break that was tucked away in U.S. President Donald Trump’s “One Big Beautiful Bill,” which now allows buyers in the U.S. to deduct from the full purchase price of a racehorse.
In Canada, section 31 of the Income Tax Act restricts the amount of losses a racehorse owner can write off to a maximum of C$17,500.
Many who make a living in Canada’s horseracing sector say the playing field is no longer close to being equal.
“If someone in the United States purchases a broodmare (an adult female horse) for (US)$300,000, they get to write off 100 per cent,” said Canadian thoroughbred breeder Glenn Sikura. “In Canada, a buyer only gets to write off (C)$17,500. Does that sound like an equal playing field to you?”
The tax benefit now offered in the U.S. means that Canadian-bred horses sold in the U.S. sell for thousands of dollars more than they do in Canada. Sikura, an Ontario breeder, is headed to Kentucky this weekend to sell three Canadian thoroughbreds.
“I’d love to sell my horses here at home in Canada, but (I) can’t afford to right now,” Sikura said, adding the financial loss of selling a horse in Canada is too much to stomach.
When a horse is sold in the United States, it often doesn’t make its way back up to Canada. If it doesn’t race in Canada, it can’t help the broader Canadian economy.
“It also leads to fewer quality foals in Canada, and from there it’s a vicious downward cycle,” Sikura said.
Job losses in Canada
The horseracing industry supports tens of thousands of jobs across the country in several different sectors.
“I employ the riders who exercise them in the morning, the grooms who dedicate their lives to caring for them,” says Canadian trainer Josie Carroll. “You have the veterinarians, your feed company comes in every day with hay and oats, there’s a whole agriculture industry that is supported, the list goes on and on.”
Caroll said she has 65 horses that she’s currently training, and she employs 41 people to care for them. Nearly every horse that ends up leaving Canada for America means another worker has to be let go.
“I’m afraid racing can’t last at this level in Canada,” Carroll said.
Section 31 of the Canadian tax code originates from a piece of legislation that was written back in 1949.
“This was meant for the ‘50s and ‘60s. The times have changed, businesses have changed,” Halloran said.
Halloran said Canuck Racing, his thoroughbred ownership and racing group, is proudly Canadian and has no plans to leave the country entirely. But he admitted that the company is just weeks away from opening a leg of its business in the U.S., where it can bank on the generous tax breaks stateside.
“We’d be silly not to look at the U.S. and explore the business opportunities now available there as well, Halloran said. “We were elbows up in Canada before it was trendy, but the current tax system in Canada simply isn’t fair.
We’re not asking for a handout here.”
Canada’s tax code views most horse owners as part-time hobby farmers, meaning they don’t get the benefits of other businesses that can write off their losses.
Halloran believes that is a massive misstep in the legislation.
“We’re not in this as a hobby. We’re a business, we’re a commercial enterprise and there’s a whole economy that is propped up by every single horse we purchase he said. “If the Canadian government wants an easy win to help Canadian workers, this is the lowest of low-hanging fruit.”
Bill Ford, executive vice-president of racing at Woodbine Racetrack, agreed. “We have to stop the flow of the horses to the U.S. that never came back.” Ford said. “There’s a simple way to do it. It’s not very complicated: just address section 31.”
CTV News asked the office of the finance minister if they were open to reviewing section 31 of the income tax code.
In an email, the federal ministry said in part that “the government recognizes the important contribution of Canada’s horse-racing industry to communities and the economy.”
“It would be inappropriate to speculate on any potential or prospective changes.”
Without changes soon, those saddled with the financial pressure of racing and raising horses in Canada say the current tax system could push the country’s historic industry right off the track.
This article was first reported by CTV News
