Toronto Maple Leafs captain John Tavares is battling the CRA over $8 million in unpaid taxes.
John Tavares, the captain of the Toronto Maple Leafs, is suing the Canada Revenue Agency for approximately $8 million in unpaid taxes.
According to court records, Tavares filed an appeal with the Tax Court of Canada last week via his attorneys, requesting the revocation of the CRA’s assessment of his 2018 tax return.
According to the appeal, the CRA found that Tavares’s 2018 income was $17.8 million more than what was disclosed. As a result, the player was sentenced to pay $1.2 million in interest along with $6.8 million in taxes, or more than 38% of his total revenue.
On July 1, 2018, 33-year-old Tavares of Mississauga, Ontario, signed a seven-year, US$77-million contract to play with the Maple Leafs, his hometown team. From 2009 until 2018, he was a member of the New York Islanders.
The $17.8 million amount includes a US$15.25 million signing bonus for the first year of the contract, which according to the appeal “was integral to Tavares’ decision” to accept the offer. The player reportedly turned down larger offers from other organizations, including one from the San Jose Sharks worth US$91 million for seven years.
Before signing with Toronto, Tavares reportedly thought about playing for the Islanders, Boston Bruins, Dallas Stars, and Tampa Bay Lightning.
Tavares’ signing bonus, according to the court file, “was an inducement to sign an agreement relating to the performance of an athlete” and isn’t to be confused with pay or income.
“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,” it reads.
According to the appeal, Tavares qualified for the lower rate of 15% based on a clause in the Canada-US Tax Treaty that lowers the rates for payments made as inducements to performers, singers, athletes, and artists.
The appeal further claims that Tavares spent forty-five days in Canada between September 13 and December 31, 2018, and that the bonus, which totaled US$11.4 million after deductions, was put into Tavares’ bank account in New York City.
“Signing bonuses are only included in income to the extent that they can reasonably be considered to be attributable to services performed in Canada,” the appeal claims, citing the Income Tax Act.
Tavares’s contract totals US$6.11 million in base pay and US$70.89 million in signing bonus money. According to the appeal, bonus money is not the same as salary because it is paid out whether or not a player plays, is traded, sent to a minor, gets hurt, or there is a labor issue.
There has been no trial to testify to the assertion.
