The federal government has lost a procedural motion in a multi-million dollar tax case involving Toronto Maple Leafs star John Tavares.
The Department of Justice had sought “a knowledgeable representative” from Maple Leaf Sports and Entertainment (MLSE), the corporate owner of the Maple Leafs, to be examined as part of their ongoing case centring on a signing bonus awarded to the 35-year-old centre who was captain of the team from 2019-2024.
In 2018, Tavares, who grew up in Mississauga, Ont., signed a multimillion-dollar deal with the Leafs as a free agent after spending the early part of his career with the New York Islanders. His package included a US$15.3 million signing bonus, which Tavares’s legal team argues constitutes an “inducement” used to attract the star player — then a U.S. resident — back to Canada. Tavares says the payment should therefore be subject to a reduced tax rate of
.
The Canada Revenue Agency (CRA), however, reassessed his 2018 tax filing, asserting that the windfall was not an inducement and should be subject to the top income tax rate (over 50 per cent). The agency’s reassessment of his filing left him with a tax bill of approximately $8 million Canadian.
In January 2024, Tavares
the reassessment to the Tax Court of Canada. During the intervening months, discovery and procedural motions have been filed, but the merits of the case have yet to be heard.
The March 27 ruling
the Department of Justice’s motion to speak with a “knowledgeable representative” of MLSE,
whom they believe has “information relevant to the material issues
.” The judge said the federal government had failed to ask Tavares the questions it sought to be answered when he was
in November 2024.
“Consequently, the Court is not satisfied that the Respondent was unable to obtain the information sought from the person (Tavares) the Respondent was entitled to examine,” Justice Edward Cook wrote on Friday.
“The Respondent served follow-up questions and Mr. Tavares provided answers to the follow-up questions. It was not a case of the Respondent being unable to obtain the information sought from Mr. Tavares. Instead, the Respondent did not seek the information from him during examination for discovery or in follow‑up questions,” Cook said.
Cook was unswayed by the Crown’s argument that Tavares’s answers “failed to provide any substantive information that would have allowed the Respondent to ask meaningful follow-up questions.”
“I do not see how the answers precluded the Respondent from asking further questions as they might relate to MLSE’s intentions and motivations,” Cook wrote. “For example, the Respondent could have asked (Tavares) how MLSE designed its offer, why MLSE thought its offer would entice Mr. Tavares and what factors were considered by MLSE.”
Tavares was “awarded costs for this motion” by the judge, though the ruling did not touch on the underlying merits of the case.
The Department of Justice did not respond to National Post’s request for comment. Tavares’s legal team at KPMG Law also declined to comment.
“The courts provide Canadians with an independent review of disputed issues, and court decisions serve to clarify the law or resolve disputes between the Canada Revenue Agency and taxpayers,” CRA spokesperson Sylvie Branch said in an email. “The confidentiality provisions of the laws we administer prevent the CRA from disclosing taxpayer information and as a result, we do not comment on the specific details of court cases.”
Since filing his challenge, Tavares has been
by other professional sports athletes challenging the CRA’s interpretation of signing bonuses, including former Leafs players Patrick Marleau and Jake Muzzin.
“The signing bonus was consideration for this sought after unrestricted free agent, Marleau — a veteran NHL player who had garnered widespread respect for his skill, versatility, dedication and leadership — committing to the three-year Contract with the Toronto Maple Leafs,” Marleau’s appeal reads.
The CRA disagreed with such a characterization, saying in court during Marleau’s case that the bonuses “were for, and dependent on, the performance of employment services under the Contract, which included giving his services and playing hockey in all games to the best of his ability, reporting to training camp, keeping in good physical condition, and playing hockey only for the Toronto Maple Leafs.”
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