Former Maple Leafs join John Tavares in legal battle over disputed tax issue
Former Maple Leafs Patrick Marleau and Jake Muzzin have joined John Tavares in his legal battle against the Canada Revenue Agency.
John Tavares' legal trouble with the Canada Revenue Agency (CRA) became public this summer when it was revealed that he was facing an 8 million dollar tax bill.
The Athletic's Dan Robson gave the initial report, explaining the dispute between John Tavares and the CRA.
Apparently, Tavares and his agent were under the impression that his signing bonus money would be taxed at a lower rate due to the U.S.-Canada tax treaty, a common loophole used by hockey players as they frequently cross the border.
"A key part in Tavares' decision to sign with Toronto was the belief that a provision in the U.S.-Canada tax treaty commonly used by professional athletes would essentially allow him to pay a lower tax rate on a initial $15M signing bonus.
Six years later, as the Leafs' captain enters the final year of that contract, Tavares faces an $8 million tax bill for his homecoming.
Tavares has disputed the Canada Revenue Agency's assessment. It's one of several ongoing cases challenging ways that pro athletes have traditionally navigated higher tax rates north of the border."
Six years later, as the Leafs' captain enters the final year of that contract, Tavares faces an $8 million tax bill for his homecoming.
Tavares has disputed the Canada Revenue Agency's assessment. It's one of several ongoing cases challenging ways that pro athletes have traditionally navigated higher tax rates north of the border."
This belief almost certainly played a large role in how Tavares, his agent, and the Maple Leafs structured his current contract with the team.
As it turns out, Tavares was not the only one to structure his deal in this way in order to maximize take-home pay.
Former Leafs Patrick Marleau and Jake Muzzin are both going through the same battle now as the CRA has attempted to tax their signing bonuses as well.
In their statement on the matter, Marleau's lawyers contend that the signing bonus should not count as, "salary, wages, or other remuneration in respect of an employment."
"The signing bonus was consideration for this sought-after unrestricted free agent, Marleau - a veteran NHL player who had garnered widespread respect for his skill, versatility, dedication, and leadership - committing to the three-year Contract with the Toronto Maple Leafs. Marleau's signing bonus is not salary, wages or other remuneration in respect of an employment."
Technically, Marleau may have a point here. After all, all NHL players are paid salaries, even if they get most of their money from signing bonuses or other revenue streams.
However, they may have a hard time convincing the CRA that those bonuses do not amount to payment for employment.
After all, Tavares certainly would not have signed that contract without the bonus money included.
If he knew it would be taxed at the same rate, he may very well have just taken it as salary instead.
Regardless, it will be interesting to see how these cases play out as they could set a precedent for future NHL contracts.
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