Patrick Marleau says Maple Leafs tax advantage helped convince him to sign in Toronto

Patrick Marleau testified in his CRA trial that Toronto's usage of a signing bonus taxed at only 15% was one of the key factors that brought him - and others - in.

Marleau is fighting a separate Tax Court appeal over the same basic issue facing John Tavares: whether signing bonuses used to 'induce' players to Toronto qualify for the 15% treaty regulations or should instead be taxed as employment income at the much higher Canadian rate.

Patrick Marleau's testimony turns Toronto's signing bonus strategy from theory into evidence

Marleau's testimony turns a long-discussed Leafs negotiating tactic into direct evidence. He told the court that the signing bonus, and the expectation it would be taxed at 15% affected his decision to come to Toronto:

I wouldn't have come to Toronto without the signing bonus, and knowing that it would only be taxed at 15 per cent made it even that much more enticing to come to Toronto. I had to move my whole family to a different country, get them all set up. Getting that money up front is huge.

It was a stark bit of honesty that gives fans insight into how the Maple Leafs and their free agent process works. Marleau also explained that the reason the bonus being taxed so low was also enticing is due to the desire to 'cash-in' after creating a long and accomplished NHL career:

It's a chance to cash in on all the hard work you've done throughout your career.

As we take a look deeper into who the Maple Leafs have signed and how their contracts were structured - we get a much better idea of exactly how much this was utilized.

Toronto used the majority of signing bonuses to lure David Clarkson in free agency after they signed him to a massive seven-year, $36.75M contract, meanwhile the sign-and-trade with Chris Tanev a few years back was also heavily structured with signing bonuses.

Toronto has repeatedly used signing-bonus-heavy contracts with major players, but Marleau's testimony is vital because he directly linked the expected tax break to his willingness to sign.

It wasn't just a chance to play in hockey's biggest market, but rather a calculated structure that ensured the Maple Leafs had a competitive chance in free agency.

A CRA victory could remove one of Toronto's top recruitment tools

Marleau admitted they weren't even on his radar until he heard the bonus was taxed so low and he spoke to Mike Babcock - so it's not just a theory, but a behind-the-scenes look into why stars decide to sign with Toronto.

But those stars coming over may be in the past if the CRA gets a victory. If it is determined that Tavares and Marleau's bonuses are to be taxed at the Canadian rate (higher than 50%) than not only do they lose a lot of money, but Toronto loses their best negotiation tactic.

Toronto is already the biggest market in the world, with a brighter spotlight on things as opposed to most teams. Now that you remove a financial benefit that offsets the pressure and constant media interrogations, and suddenly you won't have a lot of interested parties.

That means that any prospective free agents will either need to accept the fact their bonuses are going to be taxed, with their commitment to the Maple Leafs needing to stretch beyond a financial incentive.

A ruling against the players could make future negotiations harder, particularly when Toronto is competing with U.S. teams that can offer different tax environments like Florida or Dallas. It would not make those elite signings impossible, but the Maple Leafs may have less financial leverage when offering contracts.

At first, the Tavares trial was more or less a determination of whether or not his signing bonus should be taxed higher but it's now evolved into something a lot more crucial. Marleau's testimony does not prove every star chose Toronto because of taxes, but it does prove that the expected 15% mattered to at least one major free-agent signing.

If that tactic suddenly gets taken away from them, then the Maple Leafs will have to start paying players a lot more per year just without the added benefit of paying it through bonuses.

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