Maple Leafs captain John Tavares in $8M fight with CRA: Report

[JR Ewing]

Toronto Maple Leafs captain John Tavares isn’t one to drop the gloves very often on the ice, but it looks like he’ll be doing so in court. Tavares reportedly is taking on the Canadian Revenue Agency (CRA) in a dispute over more than $8 million in taxes and interest that the government says he owes. The case stems from the $15.3-million signing bonus that Tavares received when joining the Leafs in 2018.

 

According to a report in the National Post, Tavares filed an appeal in the Tax Court of Canada through his lawyers last week seeking to have the CRA’s reassessment of his 2018 tax return set aside. The appeal claims the CRA incorrectly calculated the taxes he owes on the signing bonus the Leafs paid him, arguing that it should have been taxed at only 15% under a provision of a Canada-U.S. taxation treaty, which sets the lower tax rate for “inducements,” such as signing bonuses.

 

Instead, the CRA assessed Tavares at a rate of more than 38% on the bonus, plus interest. The government agency has not yet filed a response to the appeal.

 

The outcome of the case could have implications on professional sports franchises looking to offer big signing bonuses to convince free agents to play in Canada — a task made harder by the Liberal government’s decision to raise the top federal tax rate from 29% to 33% in 2016.

 

“Tavares is a marquee player and there was a great amount of interest by the bidding teams in signing him,” his lawyers state in the appeal filing.

 

At the time, Sports Illustrated said the higher combined tax rates in Canada and Ontario meant Tavares’ effective take-home pay would be $4.5 million per year if he signed with Toronto, compared to $5.9 million if he had inked a deal with the Dallas Stars.

 

But the Mississauga native turned down larger bids from other teams to play in Toronto — including a $91-million, seven-year offer from San Jose.

 

The $15.3-million signing bonus offered by Toronto “was integral” in his decision, the appeal says.

 

The CRA’s reassessment says Tavares’ income for 2018 was $17.8 million higher than reported, and calculated that he owed an additional $6.8 million in taxes, plus $1.2 million in interest on the arrears, according to the appeal.

 

However, Tavares argues that the bonus was paid into his New York-based bank account in July 2018 and that he spent only 45 days in Canada between September and December of that year, once he began playing with Leafs.

 

Not insignificantly, Tavares’ contract ends after the 2024-25 season and he should be looking to cash in — perhaps for the last time in his career.

 

According to capfriendly.com, Tavares receives the vast majority of his salary through bonuses. In fact, of the $77 million in his seven-year contract, a whopping $70,890,000 of it is designated as a signing bonus.

 

https://torontosun.com/sports/hockey/nhl/toronto-maple-leafs/tavares-in-8-million-fight-with-cra