Ontario Racing is expressing disappointment that the federal government’s 2026 Budget fails to repeal Section 31 of the Income Tax Act, missing an important opportunity to strengthen Canada’s horse racing industry, protect jobs and investment, and restore tax fairness for businesses operating across the equine and agricultural sectors.
Titled Masters of Our Destiny, Budget 2026 emphasizes the importance of economic sovereignty, competitiveness and securing Canada’s economic future. Yet, by leaving Section 31 untouched, the government has maintained an outdated tax provision that discourages investment in Canadian horse racing and places domestic owners, breeders and racing operations at a growing competitive disadvantage.
“At a time when Canada is focused on strengthening our economy and keeping investment at home, we should be removing barriers that make it harder for Canadian industries to compete,” said John Hayes, Independent Chair of Ontario Racing. “Unfortunately, this budget misses an opportunity to do exactly that. We cannot be masters of our own economic destiny while maintaining tax policies that encourage investment in Canadian horse racing to move south of the border.”
Section 31 of the Income Tax Act restricts the ability of legitimate farming businesses to deduct business losses against other sources of income, capping eligible annual deductions at $17,500. Originally introduced in the 1950s to prevent the misuse of hobby-farm tax deductions, the provision no longer reflects the realities of modern horse racing and breeding operations, which require significant upfront investment and often rely on diversified income streams to remain viable.
The consequences are felt throughout Ontario’s horse racing industry. From horse owners and breeders to trainers, stable operators, veterinarians, feed suppliers and transportation providers, thousands of individuals and businesses depend on a healthy and competitive racing sector. By discouraging investment and limiting the ability of legitimate businesses to manage losses, Section 31 places additional pressure on an industry that supports employment and economic activity in communities across the province.
The need for reform has become increasingly urgent as recent U.S. tax changes have made investment in American horse racing and breeding operations significantly more attractive. New provisions allowing immediate deductions of 100 per cent of the cost of qualifying racehorses have widened the competitive gap, creating an additional incentive for owners and investors to direct their capital south of the border.
“Ontario’s horse racing industry competes directly with jurisdictions in the United States for horses, owners, investment and talent,” said Gordon Thain, executive director of Ontario Racing. “Every dollar invested outside Canada represents a missed opportunity to support Canadian breeders, racing operations and the thousands of people whose livelihoods depend on this industry. Repealing Section 31 would help level the playing field without requiring a new government spending program or subsidy.”
While Budget 2026 did not address Section 31, Ontario Racing and its Board, which represents all facets of the industry in the province, welcomes the government’s commitment in Section 6.1 to modernizing Canada’s tax system, including reviewing outdated provisions that no longer serve their intended purpose. With additional tax reforms planned for the Spring Economic Update 2027, the organization sees an important opportunity to address the competitive disadvantages facing Canada’s horse racing industry.
“Building a stronger, more self-reliant Canadian economy means giving our domestic industries the tools they need to succeed,” said Hayes. “We welcome the government’s recognition that outdated tax rules need to be addressed, and we are committed to working with federal officials to ensure that Section 31 is part of the next phase of tax reform. Ontario’s horse racing industry deserves a level playing field and a fair opportunity to compete.”
Ontario Racing supports the longstanding call to repeal Section 31 and restore tax fairness for Canada’s equine and broader agricultural sectors. The organization will continue working with the federal government and parliamentarians to advance this reform and ensure that Canadian horse racing can continue to attract investment, support employment and contribute to rural economic growth.
For more information on the campaign to repeal Section 31 and restore tax fairness for Canadian farmers, please visit fairnessforfarmers.ca.
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