Governments love 'sin' taxes. They fill up the coffers while creating the illusion that government is the high-minded protector of society's moral well-being. But should government be running 'sin' businesses? If the performance of the BC Lottery Corporation (BCLC) is any indication, the answer is no – it creates far too much risk for players and taxpayers.
The B.C. government made the province the first jurisdiction in North America to legalize online gambling. Government says people in B.C. spend $100 million per year at illegal offshore gambling sites and it wants in on the revenue from 'sin.' The government assures us it's the right move because the expected cash injection will go to education and healthcare.
But the B.C. government's expansion into online gambling is a move in the wrong direction. If government wants a piece of the action, it should set the rules of the game and let the private sector take the risk.
On the day the new online gambling site opened, the CEO of the government's gambling monopoly, the BCLC said, "a safe, secure and regulated alternative operated in B.C. is a sensible decision."
But is it safe and secure? Seems not.
On that very same day, the site had to be shut down because some people were able to play using other peoples' money – so much for safety and security.
However, this isn't the first time bungling at the BCLC has created risks for both players and taxpayers.
One woman, while on a BCLC list that was supposed to stop her from going inside B.C. casinos, managed to lose $331,000 inside two casinos. She is now suing the BCLC. This "regulated alternative" is leaving taxpayers at risk for big legal bills.
But wait, there's more.
The BCLC was also fined $670,000 by the Financial Transactions and Reports Analysis Centre, a federal regulator, for breaking the federal Proceeds of Crime Act more than 1,000 times. Leaving aside the much bigger issue of potentially helping criminals launder money, the blundering BCLC is leaving taxpayers at risk for big fines like these.
And let’s not forget about the $603,362 severance package paid to the previous BCLC CEO. He was fired after an Ombusdman report found the BCLC wasn't monitoring lottery ticket retailers very well, and the BCLC itself was not being regulated by government at all before 2006. The fired CEO certainly hit the jackpot, though. His severance payout gave him $842,201 in total compensation in 2007-08. These severance prize packages are another risk just too big for taxpayers to bear.
Given all the problems at the BCLC, the very last thing the government should be doing is getting even more involved in the 'sin' business. However, there is still a way for government to cash-in on 'sin.'
The government collects about $700 million in tax revenue every year from sales of another 'sin' product, tobacco, without a fumbling crown corporation to oversee those sales. Meanwhile, of the $2 billion in revenue the BCLC collects, about $1 billion goes to government and $1 billion covers BCLC's costs.
If the government can generate a pile of cash on tobacco sales without a BC Tobacco Corporation, it could probably also win big without a BC Lottery Corporation. And you can bet the government would be a lot more careful about regulating private companies than it is about regulating itself.
The government isn't in the tobacco business and it shouldn't be in the gambling business either. Government dens of iniquity are not safer or more secure for gamblers and create huge risks for taxpayers. Government can still get a piece of the gambling action by setting the rules of the game and taxing private gambling businesses. Let's leave the games of chance to those playing with their own money.
Maureen Bader, BC Director, CTF, 604-608-6770
Let's Talk Taxes is a weekly commentary provided by the Canadian Taxpayers Federation. The CTF is a non-profit, non-partisan, educational and advocacy organization funded by free-will contributions.