I’m a John Tavares fan. The dude never cheats, never complains, works his ass off, and has outplayed his massive 7-year 77 million dollar contract in 2018.

HOWEVER, his recent on-ice struggles have been a talking point, and a MASSIVE tax bill might have something to do with it.

Source: John Tavares filed an appeal in the Tax Court of Canada last week through his lawyers seeking to have the CRA’s reassessment of his 2018 tax return set aside.

The appeal claims the CRA incorrectly calculated the taxes he owes on the US$15.3 million signing bonus the Leafs paid him after his contract ended with the New York Islanders in 2018.

Tavares argues the bonus should have been taxed at only 15 per cent under a provision of a Canada-U.S. taxation treaty, which sets the lower tax rate for “inducements,” such as signing bonuses, paid to athletes, artists, actors and musicians.

The CRA assessed that he must pay a rate of over 38-per-cent on the bonus, plus interest, but it has not yet filed a response to the appeal. None of the allegations have been proven in court.

The outcome of the case could have a bearing on professional sports franchises looking to offer big signing bonuses to convince unrestricted free agents to play north of the border.

The tax dispute could also discourage Tavares, 33, from re-signing with the Leafs when his current seven-year, US$77 million contract ends after next season. The vast majority of the star player’s compensation for the team is structured as a bonus, with Tavares taking a salary of less than $1 million per year.

CRA alleges Johnny needs to cough up $8 million (the difference between 15 and 38%, including “penalties”). Johnny’s tax lawyers are saying, “Whoaah, there’s a US/Canada tax treaty that covers this issue,” so Johnny is going to war with the government of Canada, and you don’t bet against the CRA.

In the big scheme of things, 8 million is a little over 10% of his contract, and as much as everyone hates the tax man, sometimes your first loss is your best loss. The CRA can turn that 8 million into $10 million this year, $12 million next, and so on.

That weighs on a man regardless of how unflappable that man seems to be. Having a surprise 8 million dollar bill arrive in the mail from the Government of Canada takes up some brain space. It might be part of why Tavares has endured his worst stretch in his stellar 15-year career.

No one LOVES getting reassessed, regardless of how calm that person is, and to Kliff’s point, John Tavares is the NHL’s version of a Monk. 

I’m on team Tavares because no one sides with the Tax Man. No One.

DB