Canadian Revenue Agency ruling on signing bonuses

[Mattilaus]

It is.

It isn't.

You think that until you see what local and federal governments all over the world waste money on.

Discussing WHAT governments spent money on is a completely different discussion as to whether someone should pay their fair share of taxes. We live in a society here and you can't just choose not to pay some taxes because you personally don't agree with something it is going to be spent on. Your time for controlling that is election time and by voting.

Yah we gotta make sure we can keep sending billions to Ukraine and millions to African countries telling them not to shit on the beach.

Not biting your political bait. If you don't like what taxes are being spent on, your time to change that is election time. You don't just get to pick and choose what you personally would like your tax dollars spent on. Don't want to pay them? Move to some third world country, I am sure quality of life will be much better without the pesky taxes.

 

[PromisedLand]

f*** the CRA

Yes! And some context why I agree with you.

CONTEXT
In the US the population is about 333 million with IRS employees about 94K i.e. 1 employee serving about 3500 Americans on avg

In Canada the population is about 39 million with CRA employees about 59K i.e 1 employee serving about only 600 Canadians on avg

The worst part is CRA has exploded in employees from 2015 while service to Canadians hasn't improved. The Canadian federal bureaucracy in some departments has exploded like crazy (i.e. OUR TAX DOLLARS). CRA is just feeding its own bureaucracy.
Source: Population of the federal public service by department or agency - Canada.ca

In the US their tax people are 3500/600 = 6 times more efficient than Canadian counterpart. It is quite embarrassing. CRA is a f***ing JOKE and yes f*** CRA

Hockey Context
I bet the people going after tavares are either Isles fans or Habs fans

Tavares is just being made a side show. Marner got similar if not better signing bonuses why is CRA not going after him? Same with McDavid? Basically Canandian players that got hefty signing bonuses but CRA not going after them? I think Tavares' accountant/asset manager effed up big time.

In any event yea... still f*** the CRA

 

[Golden_Jet]

Tavares is just being made a side show. Marner got similar if not better signing bonuses why is CRA not going after him? Same with McDavid? Basically Canandian players that got hefty signing bonuses but CRA not going after them? I think Tavares' accountant/asset manager effed up big time.

Obviously you haven’t read why or don’t understand what is happening here.

Marner and McDavid don’t count, they are paying full taxes.

 

[Mattilaus]

Tavares is just being made a side show. Marner got similar if not better signing bonuses why is CRA not going after him? Same with McDavid? Basically Canandian players that got hefty signing bonuses but CRA not going after them? I think Tavares' accountant/asset manager effed up big time.

They are paying........Do you even understand the Tavares situation?

 

[Golden_Jet]

Obviously you haven’t read why or don’t understand what is happening here.

Marner and McDavid don’t count, they are paying full taxes.

@PromisedLand, wow what?

You’ve proven in the first post you don’t understand the differences, or the case at all.

 

[PromisedLand]

View attachment 906701

read about 1775 American Revolution

LMAO

@PromisedLand, wow what?

You’ve proven in the first post you don’t understand the differences, or the case at all.

do you have reading comprehension issue? read my post again... and slowly....

 

[Mr Positive]

It does suck for Canadian NHL teams and fans that we have this huge handicap.

We should have a list of the top earners in the league after taxes

 

[Golden_Jet]

do you have reading comprehension issue? read my post again... and slowly....

LMAO, there was nothing to read, but an emoji,
Read my response to the emoji, very slowly.

It does suck for Canadian NHL teams and fans that we have this huge handicap.

We should have a list of the top earners in the league after taxes

Matthews

 

[PromisedLand]

LMAO, there was nothing to read, but an emoji,
Read my response to the emoji, very very slowly.

Life is too short to waste my time on stupid shit bro. Peace out

 

[Golden_Jet]

Life is too short to waste my time on stupid shit bro. Peace out

I get it. You embarrassed yourself, thinking McDavid and Marner qualified for the same tax benefit that Tavares tried for, and Matthews actually qualifies for.

 

[Matt Ress]

Sucks that people are so divided on this when we should first band together and be much more critical of what the government does with our taxes, then it makes these conversations much more clear. I'm American so do your thing, Canadians but we have similar conversations here.

 

[eojsmada]

And if he already paid taxes in the USA, then he won't be required to pay them in Canada as there is a tax treaty between the two countries (basically what the entire case is about).

NOBODY should get taxed for their income by 2 different countries.

That's where the Foreign Tax Credit comes in. You never get double-taxed in this situation, you just pay the higher of the two. But he would have to figure out a way to get a refund from the US for the 6 month pro-rated amount and then pay the other 6-months to Canada.

I was under the impression that it did affect him as he lives in Canada and is a Canadian Tax Resident that also spends more than 183 days living in Canada and also because of this:

‘Anywhere but Canada’: How a tax ruling could hobble pro teams north of the border

The ruling on John Tavares' signing bonus could have far-reaching implications for future pros contemplating a deal with a Canadian team.

www.nytimes.com

So my understanding is Leon Draisaitl in my example is a Canadian tax resident. Which means he'd be liable to 53% as well.

Mega-star bar will keep rising, tax advantages, and 5 other NHL items

LAS VEGAS - Connor McDavid, the best hockey player of the salary-cap era, owned the highest salary-cap hit in the NHL for five seasons in his early 20s.Finally, in 2023-24, somebody surpassed McDavid's $12.5-million average annual value, as Nathan MacKinnon signed for an extra $100,000 a year...

www.thescore.com

So I think Draisaitl already pays that tax, its more or less Tavares that is fighting it because he was a US Citizen Tax Resident at the time of his contract and they tried to act like the signing bonus wasn't actual salary which is the part that if they think they're going to win, likely won't because it's a tactic most teams use to get these players signed and get them their money asap, but it's still considered a part of their cap hit and salary which is literally what they sign and proves it as such as well as their actual cap hit being affected by it, so that won't help Tavares' case either. I think the Draisaitl part was just me saying what is already being done, he does pay the tax bracket he's in, he'll finally make more but he'll also lose more.

And this article - https://www.thestar.com/sports/leaf...cle_fb1433ee-6c4d-11ef-8869-17f50be4ad86.html

As well as this - Comparing NHL Player Contracts

My apologies, I thought you meant he would have some kind of issues between Germany and Canada. If he is a Canadian Resident then he is subject to whatever penalties any other person would, living in Canada.

 

[Javaman]

This doesn’t really have anything to do with loopholes. This is standard tax treatment for signing bonuses for any Canadian, whether it’s a couple thousand or a couple million.

The only thing at issue is that the CRA doesn’t think NHL signing bonuses meet their definition of a signing bonus, but rather are regular income.

I was using the word "loophole" as shorthand for "using legally permissible strategies to minimize or outright avoid paying taxes on financial compensation from your employer."

Isn't this what JT is doing by claiming he was a US resident at the time he earned 96% of his salary in the form of a signing bonus?

 

[Soundwave]

If someone for example attempts to occupy your privately owned land or take possession of your motor vehicle, why should government resources be wasted addressing the issue when you're the only immediate beneficiary and can purchase the protection services you require from private providers?

Or is it simply that this form of social security is suddenly fine and necessary when it happens to align with your own interests?

Virtually every top economy in the world offers this, that's not worth 50% of your income.

The truth is that's a lame duck excuse to try and justify taking money that isn't yours for offering very little in return.

No one is saying no amount of social services should be offered, but there should be a cut off line after a certain level of quality of life is reached and one group of people are already paying for like more than 50% of those services. People in countries like Canada and the US already receive very high level social services, lots of people got monthly COVID cheques for months on end, and wealthy people paid a disproportionate amount of that bill every year.

Someone else's bank account isn't an unlimited piggy bank slush fund for a government drunk on spending to use.

 

[Albatros]

Virtually every top economy in the world offers this, that's not worth 50% of your income.

The truth is that's a lame duck excuse to try and justify taking money that isn't yours for offering very little in return.

No one is saying no amount of social services should be offered, but there should be a cut off line after a certain level of quality of life is reached and one group of people are already paying for like more than 50% of those services. People in countries like Canada and the US already receive very high level social services, lots of people got monthly COVID cheques for months on end, and wealthy people paid a disproportionate amount of that bill every year.

Someone else's bank account isn't an unlimited piggy bank slush fund for a government drunk on spending to use.

If I had that much property I'd happily pay 50 % for not having to worry about losing 100 %. You're free to feel differently, but nonetheless you're not finding a more complete and reliable protection deal for your private property from the private sector.

But maybe you're right that there should be a cutoff like in other social security, and the government should only protect 50 % of your private property. In turn you'd only pay 25 % tax. Any loss below 50 % and the government does nothing. Could make that 10-10-90 as well if you prefer.

 

[Knave]

People are being so f***ing weird lmao.

Corporations and accountants and lawyers always push the rules. You go over how you want to structure something and then you get accountants and lawyers to give their opinion on how the CRA might handle it.

Typically the CRA says "okay, fine" and lets it slide assuming it's not egregious. It looks like in this case they pushed a little too far, the CRA decided to take it to court.

 

[StreetHawk]

People are being so f***ing weird lmao.

Corporations and accountants and lawyers always push the rules. You go over how you want to structure something and then you get accountants and lawyers to give their opinion on how the CRA might handle it.

Typically the CRA says "okay, fine" and lets it slide assuming it's not egregious. It looks like in this case they pushed a little too far, the CRA decided to take it to court.

There have been plenty of Canadians who played for US teams their whole career and were later traded to a Canadian team or signed with a Canadian team. I would assume some got signing bonuses. Be it Weber traded from Nash to MTL or Hamhuis signing with Van after spending his career in Nash for example.

Something that Tavares's team of people did caught the eye of the CRA vs what others have done in the past I would imagine.

 

[banks]

People are being so f***ing weird lmao.

Corporations and accountants and lawyers always push the rules. You go over how you want to structure something and then you get accountants and lawyers to give their opinion on how the CRA might handle it.

Typically the CRA says "okay, fine" and lets it slide assuming it's not egregious. It looks like in this case they pushed a little too far, the CRA decided to take it to court.

I agree with you. And that's a pretty reasonable take and explanation. But it's still pretty bonkers that there's so many NHL contracts, yet the league and government suddenly can't agree on what happens with them. How can there be gray area? How has this not been figured out yet?

This is like when GMs started pushing the limits of the CBA with those backsliding deals. You negotiated a CBA down to HRR splits, travel arrangements, per-diems, snow days, medications, everything. But you didn't know what to do with lots of term? How?

 

[sena]

You think he filed his taxes incorrectly? You think he doesn’t have a team of accountants and tax lawyers who pored over every detail of the contract to ensure it was structured in accordance with tax codes?

The contract was structured and signed in accordance with the rules laid out in the tax treaty betwen the US and Canada. In this case it’s the CRA who has assessed him incorrectly and now they’re trying to make the argument for why this bonus should be taxed as regular income instead of in the long standing manner that signing bonuses and other inducements for athletes, artists, actors and musicians are taxed which is very clearly laid out in the above mention tax treaty.

rbc wealth management says

Canadian tax purposes, the signing bonus will be taxable in the province where the player is a resident at the end of the calendar year.

 

[Knave]

I agree with you. And that's a pretty reasonable take and explanation. But it's still pretty bonkers that there's so many NHL contracts, yet the league and government suddenly can't agree on what happens with them. How can there be gray area? How has this not been figured out yet?

This is like when GMs started pushing the limits of the CBA with those backsliding deals. You negotiated a CBA down to HRR splits, travel arrangements, per-diems, snow days, medications, everything. But you didn't know what to do with lots of term? How?

I don't really follow that closely and I won't claim to be an expert. I work with people who do the tax planning stuff but I don't have first hand knowledge beyond what I learned back in the day in university.

Throwing out an idea: is this trend of the vast majority of salary being in the form of lump sum signing bonuses a relatively new thing for the NHL?

Paying Tavares a $1 million signing bonus and then he comes and plays on an $8M salary is different from a $8M signing bonus to come play for a $1 million salary. And if I'm not mistaken scenario 2 is a bit newer for professional sports and the NHL and by extension tax authorities.

If you're a tax authority and you see this change your first thought might be "they're trying to avoid paying tax with an 'acshtually technically it's not income' ".

And lack of enforcement is another part of it. The CRA can't fight everyone on everything. Maybe now the numbers are big enough, the problem is big enough they're deciding to pursue it. Maybe Tavares isn't the first but rather the first to refuse to pay and take it to court. Or maybe he's the first being the first high profile free agent signing to a Canadian team.

 

[Non Player Canadiens]

Yes! And some context why I agree with you.

CONTEXT
In the US the population is about 333 million with IRS employees about 94K i.e. 1 employee serving about 3500 Americans on avg

In Canada the population is about 39 million with CRA employees about 59K i.e 1 employee serving about only 600 Canadians on avg

The worst part is CRA has exploded in employees from 2015 while service to Canadians hasn't improved. The Canadian federal bureaucracy in some departments has exploded like crazy (i.e. OUR TAX DOLLARS). CRA is just feeding its own bureaucracy.
Source: Population of the federal public service by department or agency - Canada.ca

In the US their tax people are 3500/600 = 6 times more efficient than Canadian counterpart. It is quite embarrassing. CRA is a f***ing JOKE and yes f*** CRA

Hockey Context
I bet the people going after tavares are either Isles fans or Habs fans

Tavares is just being made a side show. Marner got similar if not better signing bonuses why is CRA not going after him? Same with McDavid? Basically Canandian players that got hefty signing bonuses but CRA not going after them? I think Tavares' accountant/asset manager effed up big time.

In any event yea... still f*** the CRA

that makes me curious, is the IRS actually 6x more efficient? I guess you'd have to measure the rate of tax fraud/money laundering/etc. per capita too.

my impression was that white collar crime is everywhere in America and thus the IRS is always fighting an uphill battle. but it'd nice to see actual analysis.

 

[theVladiator]

that makes me curious, is the IRS actually 6x more efficient? I guess you'd have to measure the rate of tax fraud/money laundering/etc. per capita too.

my impression was that white collar crime is everywhere in America and thus the IRS is always fighting an uphill battle. but it'd nice to see actual analysis.

You are better off taking claims of that poster with a grain of salt. I do not get the impression he/she puts much homework into them.

In the specific case of IRS vs CRA, it's hard to compare apples to oranges. AFAIK IRS doesn't administer local taxes (state income/state sales/municipal sales). CRA does. There could be other programs that CRA administers and IRS doesn't. Economies of scale are also on IRS side here. Interesting question for sure, but not on the basis of "data" in the post you quoted.

 

[Soundwave]

If I had that much property I'd happily pay 50 % for not having to worry about losing 100 %. You're free to feel differently, but nonetheless you're not finding a more complete and reliable protection deal for your private property from the private sector.

But maybe you're right that there should be a cutoff like in other social security, and the government should only protect 50 % of your private property. In turn you'd only pay 25 % tax. Any loss below 50 % and the government does nothing. Could make that 10-10-90 as well if you prefer.

The mafia also works under the principal of pay up an exorbitant amount or something could happen to your private property.

You want to run a country that way, you're free to do so, but you'll have no high earners wanting to move into your country and the ones who are there will eventually leave over time if your who concept is to be outright hostile to that group. Especially when the weather is not great to begin with.

And then good luck with tax revenue, then all the folks making 35k-75k+ are going to realize they have to actually pay a lot more taxes because they were actually getting a sweet deal before getting way more services than what they paid into. Either that or their services are going to be cut massively (also good luck retaining doctors in the first place).

 

[Toby91ca]

You are better off taking claims of that poster with a grain of salt. I do not get the impression he/she puts much homework into them.

In the specific case of IRS vs CRA, it's hard to compare apples to oranges. AFAIK IRS doesn't administer local taxes (state income/state sales/municipal sales). CRA does. There could be other programs that CRA administers and IRS doesn't. Economies of scale are also on IRS side here. Interesting question for sure, but not on the basis of "data" in the post you quoted.

From what I understand, the IRS is extremely under resourced

 

[MasterofGrond]

In the US their tax people are 3500/600 = 6 times more efficient than Canadian counterpart. It is quite embarrassing. CRA is a f***ing JOKE and yes f*** CRA

Look, I don't know a damn thing about the CRA. It probably sucks.

However, the IRS having 1/6th as many agents only makes them 6 times as efficient if they actually do an equally good job.

And let me tell you, I dunno about the CRA, but the IRS is not doing a good f***ing job.