The dispute over the tax rate on a US$15.3M signing bonus could affect Tavares’s future in Toronto and the ability of Canadian professional sports teams to sign top players
Toronto Maple Leafs captain John Tavares is taking the Canada Revenue Agency to court in a fight over more than $8 million in taxes and interest the government says the star forward owes.
The dispute is over the signing bonus Tavares received for joining the team nearly six years ago. But the outcome could affect Tavares’s future in Toronto and, more broadly, the ability of Canadian professional sports teams to sign pricey top players.
The appeal claims the CRA incorrectly calculated the taxes he owes on the US$15.3 million signing bonus the Leafs paid him after his contract ended with the New York Islanders in 2018.
Tavares argues the bonus should have been taxed at only 15 per cent under a provision of a Canada-U.S. taxation treaty, which sets the lower tax rate for “inducements,” such as signing bonuses, paid to athletes, artists, actors and musicians.
The CRA assessed that he must pay a rate of over 38-per-cent on the bonus, plus interest, but it has not yet filed a response to the appeal. None of the allegations have been proven in court.
The outcome of the case could have a bearing on professional sports franchises looking to offer big signing bonuses to convince unrestricted free agents to play north of the border — a task made harder by the Liberal government’s decision to raise the top federal tax rate from 29 per cent to 33 per cent in 2016.
The tax dispute could also discourage Tavares, 33, from re-signing with the Leafs when his current seven-year, US$77 million contract ends after next season. The vast majority of the star player’s compensation for the team is structured as a bonus, with Tavares taking a salary of less than $1 million per year.
“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 to the tax court.
At the time, Sports Illustrated said the higher combined tax rates in Canada and Ontario meant Tavares’s effective take-home pay would be US$4.5 million per year if he signed with Toronto, compared to US$5.9 million if he had inked a deal with Dallas.
But the Mississauga, Ont., native surprised hockey-watchers by signing with the Leafs, saying it was his childhood dream to play for his hometown team. He says he turned down larger bids from other teams to play in Toronto, including a US$91-million, seven-year offer from San Jose.
The US$15.3-million signing bonus offered by Toronto “was integral” in his decision, the appeal says.
The CRA’s reassessment says Tavares’s 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.
“The signing bonus was consideration for Tavares — a uniquely skilled and sought-after unrestricted free agent — committing to the seven-year Contract with the Toronto Maple Leafs,” the appeal says, claiming it was “not salary, wages or other remuneration in respect of employment.”
The $17.8-million payment in the CRA’s sights represents only the 2018 portion of Tavares’s entire signing bonus, which totals US$70.9 million over the term of his contract. The remainder of his overall compensation is paid in an annual salary of $910,000.
Tavares’s appeal argues that the bonus is different from salary, because it would still be paid to him if he were traded, sent to the minors or injured, and it should not be considered normal income for tax purposes.
As such, he argues, the 2018 portion of the bonus should be taxed at only the 15-per-cent U.S. inducement rate.
But there are tax mechanisms, such as retirement compensation agreements, that can be used to defer income and offset the disadvantage of playing for the Toronto Blue Jays, Toronto Raptors or any of Canada’s seven NHL teams.
Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark nationalpost.com and sign up for our daily newsletter, Posted, here.
EDMONTON – RCMP say a second suspect has been arrested in the killing of an Alberta county worker.
Mounties say 28-year-old Elijah Strawberry was taken into custody Friday at a house on O’Chiese First Nation.
Colin Hough, a worker with Rocky View County, was shot and killed while on the job on a rural road east of Calgary on Aug. 6.
Another man who worked for Fortis Alberta was shot and wounded, and RCMP said the suspects fled in a Rocky View County work truck.
Police later arrested Arthur Wayne Penner, 35, and charged him with first-degree murder and attempted murder, and a warrant was issued for Strawberry’s arrest.
RCMP also said there was a $10,000 reward for information leading to the arrest of Strawberry, describing him as armed and dangerous.
Chief Supt. Roberta McKale, told a news conference in Edmonton that officers had received tips and information over the last few weeks.
“I don’t know of many members that when were stopped, fuelling up our vehicles, we weren’t keeping an eye out, looking for him,” she said.
But officers had been investigating other cases when they found Strawberry.
“Our investigators were in O’Chiese First Nation at a residence on another matter and the major crimes unit was there working another file and ended up locating him hiding in the residence,” McKale said.
While an investigation is still underway, RCMP say they’re confident both suspects in the case are in police custody.
This report by The Canadian Press was first published Sept. 13, 2024.
The Canadian Press. All rights reserved.
RICHMOND, B.C. – The Integrated Homicide Investigation Team says the 26-year-old son of a man found dead on British Columbia’s Sunshine Coast has been charged with his murder.
Police say 58-year-old Henry Doyle was found badly injured on a forest service road in Egmont last September and died of his injuries.
The homicide team took over when the BC Coroners Service said the man’s death was suspicious.
It says in a statement that the BC Prosecution Service has approved one count of first-degree murder against the man’s son, Jackson Doyle.
Police say the accused will remain in custody until at least his next court appearance.
The homicide team says investigators remained committed to solving the case with the help of the community of Egmont, the RCMP on the Sunshine Coast and in Richmond, and the Vancouver Police Department.
This report by The Canadian Press was first published Sept. 13, 2024.
The Canadian Press. All rights reserved.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, have broken off without an agreement following 15 hours of talks.
Joe McCann, president of Amalgamated Transit Union Local 1724, says they stayed at the bargaining table with help from a mediator until 2 a.m. Friday and made “some progress.”
However, he says the union negotiators didn’t get an offer that they could recommend to the membership.
McCann says that in some ways they are close to an agreement, but in other areas they are “miles apart.”
About 600 employees of the door-to-door transit service for people who can’t navigate the conventional transit system have been on strike since last week, pausing service for all but essential medical trips.
McCann asks HandyDART users to be “patient,” since they are trying to get not only a fair contract for workers but also a better service for customers.
He says it’s unclear when the talks will resume, but he hopes next week at the latest.
The employer, Transdev, didn’t reply to an interview request before publication.
This report by The Canadian Press was first published Sept. 13, 2024.
The Canadian Press. All rights reserved.
Dolphins will bring in another quarterback, while Tagovailoa deals with concussion
David Beckham among soccer dignitaries attending ex-England coach Sven-Goran Eriksson’s funeral
Vancouver Whitecaps cautious of lowly San Jose Earthquakes
Edmonton Oilers sign defenceman Travis Dermott to professional tryout
Alberta town adopts new resident code of conduct to address staff safety
United Airlines will offer free internet on flights using service from Elon Musk’s SpaceX
Kirk’s walk-off single in 11th inning lifts Blue Jays past Cardinals 4-3
Unifor says workers at Walmart warehouse in Mississauga, Ont., vote to join union
