The dispute centers around Tavares' $15.9 million signing bonus paid out in the first year of his contract with the Toronto Maple Leafs.
John Tavares is reportedly heading to court with Canada's federal tax collection agency over a reassessment of his 2018 tax return.
According to Glen McGregor of the National Post, Tavares is taking the Canada Revenue Agency to court in a battle over $8 million in taxes and interest the tax collection agency says the player owes following a reassessment of his 2018 tax return.
The Mississauga, Ontario native signed a seven-year, $77 million contract with the Maple Leafs on July 1, 2018. In his deal, the Maple Leafs paid out $15.3 million of his 2018-19 compensation in a signing bonus on that same day.
In the appeal, Tavares' representatives say the $15.3 million signing bonus offered by Toronto “was integral” in his decision to sign with the Maple Leafs when there were other suitors for his services.
Impact on Maple Leafs signings
The outcome of a player's taxes would normally not have any impact on the Maple Leafs, but if this case goes against Tavares, there is a potential spillover effect on the NHL club and other Canadian sports franchises in trying to sign professional athletes.
The Maple Leafs use signing bonuses as a sweetener to get around the disadvantage of higher taxes compared to other states in the United States. The Maple Leafs have used a similar structure in signing bonuses for all of their star players and some mid-range players following the signing of Tavares.
In June, it was revealed that the CRA and Jose Bautista were involved in a legal battle over the Toronto Blue Jays star's pension deductions in 2015 and 2016.
With players being aware that signing with a club in Canada could one day lead to a dispute with a CRA, that might be enough of a deterrent for players to choose to play elsewhere.
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