Friedman: CRA going after former athletes for Canadian teams could impact their ability to draw free agents

[Tufted Titmouse]

I hope most people realize Taxes aren't so simple as Income x Rate = Taxes at a flat rate and just call it a day, and depend on a whole circumstance of factors.

"Post-Tax" Salary Cap makes no sense, trying to give some sort of "tax credit" for teams in high-tax markets is non-sensible.

True parity will never exist in a salary cap world for this reason. You can't really build in a tax credit, but there is a real difference in after tax income.

It's just something Canadian teams will have to live with as long as there is a cap. To me it's less of a disadvantage than the fact that Canadian weather and lifestyle is preferred by very few athletes. Not many Americans want to live their lives in Canada. Just the way it be.

 

[TheDoldrums]

Why even bring this up? The two things are not connected. The government should be going after those who misappropriated funds AND people who aren't paying their taxes. It's not an either/or scenario.

Just FYI: these millionaire athletes don't care about you, not sure why you're so intent on defending htem.

I'm not defending anyone? I just indicated I don't care. I'm not going to applaud the CRA for ignoring a lot but going after a few very public people.

 

[Lady Stanley]

These ridiculous tax rates are why players avoid Canada

It's crazy we all know this as fact, and people turn around and think a magical GM is gonna descend from the heavens and cure the taxes and weather issue.

I'll believe that's happening when they take death out of the death and taxes conversation.

I don't get the mindset of a person who thinks Canadian teams aren't up against a brick wall.

I mean in virtually every other business, (un capped businesses btw) it's a massive issue.

 

[Backlund]

I heard Allan Walsh himself explain this on a podcast, and in normal Allan Walsh fashion there is much more to it than he tries to convey in a tweet to look smart.

I'm fairly certain that to achieve this you have to live outside of Canada for a defined time after retirement. So yes, this could work for many players that aren't Canadian, but can't for anyone that wants to step foot in the country after they retire.

There probably is, but the whole tax things is extremely overblown on here. Nobody making that much money doesn't have an accountant they pay so they can keep more of it. That's just one of a few different options available I'm sure.

 

[Figgy44]

I'm not defending anyone? I just indicated I don't care. I'm not going to applaud the CRA for ignoring a lot but going after a few very public people.

Based on anecdotes and interactions I've had with the CRA in the last few years, they aren't just going after a few very public people. Very average and low income Canadians are getting nickel and dimed as well. They just don't get news paper articles written about them because their situations aren't as ubiquitous or interesting to read about vs millionaires. The CRA has gotten way more aggressive across the board for interest and penalties since 2021.

No one cares that a couple hundred bucks of honest mistakes that used to be easily forgiven by the CRA and are not demanded in full with interest and penalties. They think it's par for the course or a corrupt or incompetent government in their eyes. It's much more fun to read about scenarios about millions of dollars.

As mentioned, the taxation of Canadian athletes have special rules that allow the taxation of salary on Canadian teams to be reasonably competitive with the USA teams, albeit some of the basics are much more complex. The topic of taxation is always daunting to the average individual. All you need to hear is Canada's one is more difficult than USA and that's all the average person needs to hear to believe that taxation is more difficult than the USA (and they aren't necessarily incorrect in believing so, just perhaps misinformed in the difficulty gap between the two).

 

[BayStBullies]

So an even bigger advantage for tax advantaged teams. The salary cap parity is a farce.

I hope most people realize Taxes aren't so simple as Income x Rate = Taxes at a flat rate and just call it a day, and depend on a whole circumstance of factors.

"Post-Tax" Salary Cap makes no sense, trying to give some sort of "tax credit" for teams in high-tax markets is non-sensible.

I hope some people also realize that the mythical tax manipulation people believe tax disadvantaged teams can use to bridge the gap, doesn't represent a silver bullet when tax advantaged markets can also manipulate their returns. The amount of NTC lists targeting to black ball high tax markets speaks for itself.

 

[Lady Stanley]

There probably is, but the whole tax things is extremely overblown on here. Nobody making that much money doesn't have an accountant they pay so they can keep more of it. That's just one of a few different options available I'm sure.

This happens on both sides of the border, and it's well understood there's way more tax loopholes state side.

You can't turn an advantage that all teams share into an advantage all share, as something that can level the playing field.

This is EA sports kind of logic. It's well understood that getting people to play in Canada is an uphill battle.

Canadian teams have to rely on luck to be competitive and beat the tax issue.

It's why a team like the Jets are entirely dependent on Hellybuck. He allowed a team to perform with subpar defense.

It seems the best a Canadian team can do is get lucky, build a team around that luck by overpaying players and selling out their future to get a 2-3 window like the Leafs/Oilers have/is ending now.

It seems pretty obvious for every American team on a 10 year window, you'll find a Canadian team limited to a 2-3 year window.

All the stats seem to back up that math.

 

[Lady Stanley]

So an even bigger advantage for tax advantaged teams. The salary cap parity is a farce.


I hope some people also realize that the mythical tax manipulation people believe tax disadvantaged teams can use to bridge the gap, doesn't represent a silver bullet when tax advantaged markets can also manipulate their returns. The amount of NTC lists targeting to black ball high tax markets speaks for itself.

It really is a sure sign of dishonesty, denial or stupidity when that isn't obvious to a person, after having it all worked out again and again.

But, yep it has to be the GM's that don't understand this, clearly a random internet user is experienced dealing with cross border tax deductions.

 

[Lady Stanley]

True parity will never exist in a salary cap world for this reason. You can't really build in a tax credit, but there is a real difference in after tax income.

Can you imagine sportsnet if the league admitted there was a true disadvantage against Canadian teams?

The only fair solution is creating a Canadian division. So the disadvantages are more equal.

It boggles my mind how Canadian teams are paying more money for a drastically lower chance for a cup.

It's like paying twice as much for a lotto ticket as a person in another town while you're town hasn't gotten a winner in 30 years.

It's just something Canadian teams will have to live with as long as there is a cap. To me it's less of a disadvantage than the fact that Canadian weather and lifestyle is preferred by very few athletes. Not many Americans want to live their lives in Canada. Just the way it be.

It makes the whole point of a league pointless though?

I mean I don't get why people root for teams that don't have a shot in hell of winning.

 

[Ace]

Tax related salary caps need to be a thing.

I don't think multi millionaires should be able to get out of paying their share of taxes, but I also think it's a legitimate issue for maintaining fairness across the league.

100%

Dollars aren’t worth the same in every market. It’s an obvious problem

 

[Nothingbutglass]

Why is it a NHL problem that Canada cant get its shit together? You don't hear the same calls for subsidies from NY and CA teams that have high tax rates compared to FLA, TX, NV.

 

[Lady Stanley]

Why is it a NHL problem that Canada cant get its shit together? You don't hear the same calls for subsidies from NY and CA teams that have high tax rates compared to FLA, TX, NV.

That's because they're major media markets.

And because the NHL still wants to continue making money from Canadian fans.

Canada still bankrolls the league on a per capita basis.

We pay for something we get nothing out of. I mean we literally haven't got a cup in this market in 30 years. It's not like anyone suspects the drought will end in the next decade.

Unless something changes it's entirely possible Canada could be on a 50-60 year long cup drought.

I mean this really is a question of education and an understanding of probability.

Even the best GM in the league will at best produce a Canadian team full of deficits, that might go on a cinderella run once every 5 years.

This isn't a case of bad gmship, it's rogers/bell Canadians paying $20 billion for a cup.

Right now Canada exists in a mirage of parity, wait until players realize how unrealistic a chance at a cup really is.

The players aren't more educated than the fans, they buy in on the same low proability as everyone else. When the players figure it out it's gonna get much much worst, which will cyclically make it even worst.

 

[PULSATING]

I don't see a problem with that to be honest. Tax the rich!

No you don't understand, the guy hits a ball really good, he's earned 5 mansions and a yacht. You're the selfish one for wanting frivolous things like schools and roads.

 

[McGarnagle]

I hope most people realize Taxes aren't so simple as Income x Rate = Taxes at a flat rate and just call it a day, and depend on a whole circumstance of factors.

"Post-Tax" Salary Cap makes no sense, trying to give some sort of "tax credit" for teams in high-tax markets is non-sensible.

This, and also that Tax Avoidance is not Tax Evasion.

I don't know about Canada, but in the US the tax code has so many moving parts and worksheets for credits and adjustments that it is entirely possible for someone with a nominal salary of $200,000 to have less of a tax burden than someone making $75,000

 

[Hoverhand]

Wouldn't surprise me. Top marginal tax rate in Ontario (where he worked) is 53.53% and someone like Bautista would have almost all of his income at that highest bracket. Then while he was living in Toronto, there's a 13% sales tax on top of that but given that's on *after tax* dollars, it's equivalent to about 19% on his pre-tax salary. Then add in property taxes, sin taxes, etc. taxes and you're easily looking at giving the government 80% of your earnings if you make the kind of money Bautista makes. It's ludicrous.

You're out of your mind if you believe 80% of his salary is going to taxes.

We have financial advisors screaming at the top of their lungs that in both Canada and the United States you can do various maneuvers to pay substantially less in taxes than you're "supposed" to.

Now half this thread is shocked that Bautista did one maneuver too many and the CRA wants their cut.

 

[Lady Stanley]

You're out of your mind if you believe 80% of his salary is going to taxes.

We have financial advisors screaming at the top of their lungs that in both Canada and the United States you can do various maneuvers to pay substantially less in taxes than you're "supposed" to.

Now half this thread is shocked that Bautista did one maneuver too many and the CRA wants their cut.

If we're getting serious I would guess it's more like

American player pays 15% in actual income tax, and a Canadian player pays something like 25% in actual income tax.

Maybe it's 30-40 whatever, but it'd be hard to believe it's anything less than a 10% difference.

 

[Sweetpotato]

Is it ludicrous?

The man owns several homes and a yacht.

Yes it is. Regardless of how much they make no one should pay that much in taxes.

 

[Nothingbutglass]

If we're getting serious I would guess it's more like

American player pays 15% in actual income tax, and a Canadian player pays something like 25% in actual income tax.

Maybe it's 30-40 whatever, but it'd be hard to believe it's anything less than a 10% difference.

So your solution is what? Canadian teams get an extra 10% cap allowance?

 

[Martin Skoula]

I also hate schools, roads, hospitals and public education!

Haha yeah all those things are world class here. Look at all those American doctors and nurses from taxless states lining up to come work here.

 

[Pink Mist]

Wouldn't surprise me. Top marginal tax rate in Ontario (where he worked) is 53.53% and someone like Bautista would have almost all of his income at that highest bracket. Then while he was living in Toronto, there's a 13% sales tax on top of that but given that's on *after tax* dollars, it's equivalent to about 19% on his pre-tax salary. Then add in property taxes, sin taxes, etc. taxes and you're easily looking at giving the government 80% of your earnings if you make the kind of money Bautista makes. It's ludicrous.



Define "Rich people". But for context, top earners in Canada already pay far more than their share.

"The top 10 percent pay 47.1 percent of income taxes and earn 33.1 percent of total income."

https://www.fraserinstitute.org/sites/default/files/measuring-the-distribution-of-taxes-in-canada.pdf

Holy misinformation.

You're delusional if you think he or any millionaire in Canada pays 80% of their income in various taxes

 

[The Hanging Jowl]

Holy misinformation.

You're delusional if you think he or any millionaire in Canada pays 80% of their income in various taxes

Feel free to point out anything I said that's wrong.

 

[Hockey Outsider]

There are a number of misconceptions in this thread:

1. Taxation for athletes is much more complicated than simply looking at the tax rate in the jurisdiction where they played. Many Americans playing in Canada have structured their affairs in such a way that they're (effectively) taxed at US income tax rates. (Auston Matthews and John Tavares appear to be doing this - and good for them for getting proper professional advice). "Jock taxes" exist (meaning that athletes need to pay income tax in many jurisdictions in which they play - not just where their team is located). Additionally, there are many differences between what expenses are deductible in Canada and the US. The point is - this is a complex topic and simply comparing the top rate in different jurisdictions can be misleading.

2. The RCA, as it currently exists, can be an enormously powerful tool to defer income taxes. (In fact, in the NBA, Canadian teams - currently only the Raptors - can't use it, because it gives athletes playing in Canada "an unfair advantage"). This gives Canadian teams a significant advantage over American teams. But it's also true that, generally, tax rates are lower in the USA. It isn't obvious which country has the more favourable tax situation from a professional athlete's perspective - it depends many specific facts.

3. With respect to Bautista's case, the issue comes down to interpretation. Based on what I've read, he appears to be using the RCA in a typical way. The challenge is, the Canadian Income Tax Act only allows "reasonable" contributions to be treated as a deduction from taxable income, and "reasonable" isn't defined in the Act. It appears that Bautista has taken the position that his significant contributions are reasonable (and therefore tax deductible), whereas the CRA says they're not reasonable (and therefore not all of the contributions should be treated as a deduction from taxable income). Without knowing more about the facts, it's difficult to comment on which side has a stronger argument. But it appears to be a matter of interpretation of a grey area.

 

[brentashton]

I also hate schools, roads, hospitals and public education!

I hate government waste, inefficient policies and political leaders who suggest that cutting their Disney subscription is an example of dealing with financial hardships.

Absolutely Tone deaf.

Government should stay in their narrow lane and let business do what it does best, generate economic growth.

 

[Martin Skoula]

I hate government waste, inefficient policies and political leaders who suggest that cutting their Disney subscription is an example of dealing with financial hardships.

Absolutely Tone deaf.

Government should stay in their narrow lane and let business do what it does best, generate economic growth.

No dude trust me the army of bureaucrats, lobbyists, and golden handcuff welfare program federal employees are going to pass measures to make the system easier to navigate and efficient and make their own jobs obsolete any day now. They just have to finish organizing the committee to inspect the viability of committee forming after the inspection inspectors association is done auditing the viability of inspecting the inspection committee first.

 

[Lady Stanley]

So your solution is what? Canadian teams get an extra 10% cap allowance?

Create a Canadian division.

Pretty simple.

Canadian teams get an equal shot at the 3rd round as American teams.