Former New York Islanders captain John Tavares is at odds with Canada’s tax service.
According to a report by Glen McGregor of the National Post, Tavares is taking the Canada Revenue Agency to court in a fight over more than $8 million in taxes and interest the government says he owes.
The dispute is over the $15.3 million signing bonus the Toronto Maple Leafs gave Tavares when they signed him to a seven-year contract as an unrestricted free agent in the summer of 2018.
Last week, Tavares filed an appeal in the Tax Court of Canada through his lawyers in hopes of having the reassessment of his 2018 tax return set aside. In his appeal, Tavares claims the CRA incorrectly calculated the taxes he owes on the signing bonus.
In their assessment, the CRA ruled Tavares must pay a rate of more than 38% on the bonus, plus interest. The Agency determined that Tavares’s earnings in 2018 were $17.8 million higher than originally reported and that he owes an extra $6.8 million in taxes, plus an extra $1.2 million in interest, according to the appeal. None of the allegations against Tavares have been proven in court.
Tavares argues that because the bonus was paid to his New York-based bank account, it should have only been taxed at a 15% rate under the provision of a tax treaty between the United States and Canada, which sets a lower tax rate for “inducements,” such as signing bonuses paid to athletes, artists, actors and musicians.
“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 extra money the CRA is after is only a portion of Tavares’ entire signing bonus, which totals $70.9 million over the course of his contract. Without his signing bonus, Tavares takes home a yearly salary of $910,000.
A timeline has not been established for the appeal to be settled.
Tavares signed his contract with the Maple Leafs as a highly sought-after free agent during the 2018 offseason and chose to sign in Toronto, much to the scorn of Islanders fans, over other bidders such as the Islanders, Boston Bruins, Dallas Stars and San Jose Sharks.
His contract expires at the end of next season.
In his time with the Maple Leafs, Tavares has amassed 391 points with 169 goals.