John Tavares in legal battle with the Canadian Government over millions of dollars
When John Tavares signed a contract with his hometown Toronto Maple Leafs, it was a dream come true. At the time the contract was the richest deal signed in Maple Leafs franchise history. That deal came with an astronomical amount of money paid out in signing bonuses.
Unfortunately, it is those exact signing bonuses that currently have Tavares in hot water with the Canadian revenue agency. Today news surfaced that Tavares is currently involved in a legal battle disputing an $8 million tax bill that was handed to him by the Canadian government. The dispute stems from a 15+ million dollar signing bonus received by Tavares.
Tavares says he should owe 15% on a US$15.3M signing bonus he received when he signed with Toronto in 2018. The CRA says the bonus should be taxed at 38%.
Tavares legal team has filed a dispute claiming that his filing of a 15% tax rate is correct. While the CRA claims, the bonus should be paid 38%. At this time the CRA has not replied to Tavares' legal team and the matter is still up in the air.
Since the implementation of the salary cap, Toronto has used the ability to play large amounts of money in signing bonus to help overcome challenges faced. This ruling could however have a great impact on the team's ability to attract certain free agents. If players are forced to pay the 40% tax rate on signing bonuses, it will eliminate the advantage Toronto has created.
This situation has continued to have been exacerbated by the fact that some American based teams have a significant tax advantage in their current market. This case could set a serious precedent going forward.
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