Tavares’ ongoing CRA lawsuit could hurt Maple Leafs in free agency – Hockey Writers – Toronto Maple Leafs

John Tavares and the Canadian Revenue Agency continue to fight in an off-season financial dispute over what the CRA calls the forward’s misrepresentation of the signing bonus he was paid by the Toronto Maple Leafs in 2018. The two sides disagreed on how to split the $15.25 million (US) he was previously given at the time of signing. You call it a signing bonus. The CRA doesn’t want to. The complaint that Tavares filed when he was considered to be owed $8 million was answered and it does not look promising for the Leafs captain.

According to Glen McGregor of CityNews, the CRA “denies that any so-called ‘signing bonus’ money was a signing bonus or compensation payment,” according to the response to the complaint. Tavares took the CRA to court in January claiming they improperly audited his 2018 tax return. He keeps the $15.25 million payment from the Leafs subject to tax at a reduced rate of 15 percent for signing bonuses paid to athletes, as stated in the tax agreement. The CRA says this was not a signing bonus, but part of his salary came out early.

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The CRA states that if Tavares had left the team, missed games, or was not part of the roster, he would have been paid a total of $15.25 million. Meanwhile, Tavares’ side says that if the NHL went into a layoff and the NHL did not play, he would be entitled to the full bonus.

What Does This Mean For Tavares?

There are a few things that could affect Tavares and the Maple Leafs if he doesn’t win the offense. First, he still has one season left on his current deal and although he has made more than the $8 million the CRA says he is owed now, $8 million is chump change. How does this affect his willingness to sign a small, team-friendly deal if he’s out of pocket for that kind of money?

He will be paid $11 million this season, but that is not his actual salary. $7.04 million of that will be paid at the start of the season as a “signing bonus.” His base salary is only $910K, meaning he will be in free agency this season. Is that a problem? It’s hard to say, but it could factor into any future decision he might make about re-signing, accepting a trade, or trying to produce for another strong contract offer. Does it affect his desire to stay in Toronto or stop going to work?

I’m not going to start pretending to know how Tavares managed his money, but this isn’t like Jacob Trouba getting fined $5K in the NHL. $8 million will do the trick.

What Does This Mean For Maple Leaves?

Looking ahead and beyond what it might mean for Tavares, what does it mean for other players in the program and looking at extensions or thinking about joining Toronto as a free agent? If the CRA doesn’t recognize these upfront payments and signing bonuses and the players don’t have a clue about how to take care of the tax implications, how many other players will get burned by this? Even worse, how many will want to avoid the CRA controversy altogether?

There are already quite a few NHL players who don’t want to come to Canada, for a number of reasons. Adding this kind of problem to the players that Toronto’s deep pockets might attract can scare players away. If Tavares loses this case with the CRA, what example does that set for the rest of the NHL? Even if he wins, how many free agents decide that fighting that battle, even if they have a good chance of winning, is not worth it?

This may be futile because Tavares’ case may be unique. He was an American citizen, paying US taxes, but he was born in Canada. The CRA says he was in Canada long enough that he was responsible for paying the CRA, including their demand to tax his signing bonus at a higher rate. What combination of current players could be facing the same situation that caused the CRA to face problems with Tavares’ tax return?