Two Former Leafs Stars Join John Tavares in High-Stakes Tax Battle Over Millions
Two former Toronto Maple Leafs are joining current Leafs star John Tavares in a million-dollar legal dispute.
Toronto Maple Leafs forward John Tavares is facing a current dispute with the Canada Revenue Agency (CRA) over owed taxes as he fights against money owed, with the Leafs assistant captain arguing he's been taxed higher than he should.
John Tavares owes $8M in taxes to CRA in relation to signing bonuses in his contract with the Toronto Maple Leafs, first reported by the National Post last year.
An appeal filed by Tavares claims that his 2018 tax return was incorrectly filed and that Tavares should have been taxed at 15%.
Canada and the United States have a specialized treaty that allows for a lower 15% tax rate for specific entertainers, a clause that includes professional athletes.
Tavares argues that the Leafs star should have been taxed with the 15% rate for athletes and that Tavares was a legal resident of the United States at the time, having just signed for Toronto.
The specific issue at hand is if the signing bonus itself counts as a part of the player's salary for a season, something that CRA argues does.
Tavares is currently not the only Leaf currently tied up in a pesky legal situation, according to a new report.
Patrick Marleau and Jake Muzzin Join Tavares In Legal Dispute Over Taxes
Former Toronto Maple Leafs Patrick Marleau and Jake Muzzin are now involved in disputes over their taxed signing bonuses.
The National Post reports that both Marleau and Muzzin face the same dispute over the 15% tax rate, arguing they too are having their signing bonuses taxed too high.
Like Tavares, both Marleau and Muzzin argue they were U.S. citizens at the time and should have been given the same reduced rate for the fact the bonus came from being sportspeople.
None of the three are disputing having to pay their taxes, but rather are questioning the amount owed to the federal government, arguing their signing bonuses are being taxed at a higher rate than it is supposed to be in their specific cases.
The case opens up questions over what is taxable in a player's contract, and having to pay full cost for their signing bonus could create difficulties for Canadian teams to use signing bonuses to lure players to their team with cities like Toronto already at a disadvantage for a larger tax bracket.
All three players have filed separately with the Tax Court of Canada, but their message is the same, that bonuses are merely a signing perk, and not money given as salary, with the Tax Court interpreting all money received as what a player is contracted to be given because they are signed to a deal and that a bonus is still a number in an agreed work contract.
The Leafs, looking to re-sign Tavares who is a free agent at the end of this season, will certainly have carefulness in negotiations in terms of bonuses in a potential contract extension.
For teams such as the Toronto Maple Leafs, this could become a problem in the future if players are scared away from the cost of playing in Toronto.
