Former NY Islanders and current Toronto Maple Leafs captain John Tavares faces tax concerns in Canada

Former NY Islanders and current Toronto Maple Leafs captain John Tavares has been in hot water with the fanbase and media in Toronto during his 10-game goalless drought just before the All-Star break. 

The former first-overall pick for the Islanders now has more significant problems on his hands in the Canada Revenue Agency (CRA). 

According to Glen McGregor of the National Post, Tavares is taking the Canada Revenue Agency to court over claims he owes more than $8M in taxes and interest. 

The claim is over the signing bonus when Tavares put pen to paper on a 7-year, $77 million contract he signed back in 2018. 

According to CapFriendly, Tavares's contract is heavily signing bonus based, earning less than $1 million in salary for each of the seven years with the Leafs. 

When Tavares agreed to a deal with Toronto in 2018, he was given a $15.25 million signing bonus for that season. The CRA claims they incorrectly calculated the taxes owed on his signing bonus from 2018, stating he owes $6.8M in taxes plus $1.2M in interest.

Tavares and his lawyers claim that a provision in the Canada-U.S. Treaty allows athletes, actors, etc., to pay only 15% in taxes on income, such as signing bonuses, as opposed to 38%. They claim the bonus was paid to Tavares’s New York-based bank account and that he only spent 45 days in Canada between the start of training camp and the end of 2018. 

“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 filed through Tavares’s lawyers says. The appeal claims it was “not salary, wages or other remuneration in respect of employment.”

Taxes paid by athletes in Canada have always been a topic of conversation in the hockey world. With states in the U.S. without state income taxes, such as Florida and Texas, athletes have an incentive to sign with organizations within these states due to the amount of money they’ll keep in their pockets rather than pay to the government. How this process with Tavares plays out can have a potential impact on future free agents signing with Canadian franchises.