John Tavares tax fight exposes a broader NHL battle with the CRA

NHL Deputy Commissioner Bill Daly's recent comments added context to the John Tavares tax saga, although he made sure not to remark directly on the current courtroom proceedings in Toronto.

While speaking to The Hockey News during the NHL's European media tour, Daly revealed how the league has its own problems with Revenue Canada.

We have our own issues with Revenue Canada on some of their interpretations of the tax laws with our clubs. So it's obviously something we're interested in, and we're following.

Bill Daly confirms the NHL has broader CRA concerns beyond the Tavares case

Daly didn't go into specifics on which clubs are involved. Furthermore, he didn't say what provisions are the problem. He wouldn't even touch the Tavares situation. Instead, the Deputy Commissioner is simply signalling towards a real problem that the NHL is fighting behind the scenes.

The CRA-NHL conversation has mostly gone through John Tavares and his now-infamous signing bonus from 2018. Daly's comments make clear that the Tavares dispute is not the NHL's only disagreement with the CRA. He did not identify the clubs or tax provisions involved, but his admission shows the league is dealing with broader interpretation issues beyond one Maple Leafs contract.

NHLPA Executive Director Marty Walsh also spoke to The Hockey News recently, although he mainly touched on the Tavares situation. He noted that it is something the players union is watching closely. They monitor financial issues on behalf of the players. Unfortunately for the union, they cannot bargain their way out of the tax situation.

We monitor those different situations around the country, whether it's a charge on our players or a tax on our players or something that John's fighting for in Canada. We want to try to be helpful where we can.

While the Tavares trial is the most public dispute NHL players and the CRA, Bill Daly and Marty Walsh's comments confirm that this is far from an isolated incident.

Toronto's signing-bonus advantage now sits inside a much larger Canadian-market tax fight

When you zoom out on this issue, it becomes clear that the Leafs are not just an “interested bystander.” Instead, they are a team with real skin in the game.

When John Tavares signed a seven-year, $77 million deal with the Toronto Maple Leafs back in July 2018, $15.25 million USD was delivered as a signing bonus. Tavares argues that the $15.25-million payment qualified as an inducement to sign under the Canada-U.S. tax treaty, which caps Canadian tax on a qualifying payment at 15 per cent. The CRA argues it should instead be treated as employment income.

However, the CRA did not agree with the assessment that this fell into the aforementioned tax treaty. Because the bonus was tied to Tavares showing up to camp, the CRA feels as though the money was more of a wage, and therefore, they want $8 million, with interest.

To make matters more interesting, Patrick Marleau is fighting the same battle against the CRA for his signing bonus with the Leafs from 2017. Marleau says the signing bonus was part of the sales pitch to get him to Toronto. Tavares was given the same pitch, and now, they are in a legal fight over it.

Toronto isn't the only city playing under the same tax rule. The treaty extends to all of Canada, which means Montreal, Ottawa, Winnipeg, Edmonton, Calgary, and Vancouver must take note. Some U.S. markets can offer players lower state income-tax burdens, which has long complicated comparisons with Canadian teams. Signing-bonus structures can be one part of that recruiting equation, but their value depends on residency, treaty treatment, and the facts of each individual contract.

Tavares might be the one in the courtroom, but seven NHL franchises will currently be paying attention as their recruiting ability hangs in the balance.

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