- Marleau took the stand Wednesday as a witness in John Tavares’ fight with the CRA
- Both are appealing tax bills over signing bonuses they paid 15 percent on instead of full Canadian rates
- Read below for what Marleau says Mike Babcock told him about recruiting free agents to Toronto
Patrick Marleau told a Toronto courtroom that the Maple Leafs recruited him with a tax break.
The former Sharks winger testified Wednesday at the Tax Court of Canada, where he and John Tavares are appealing reassessments from the Canada Revenue Agency over how their Toronto signing bonuses should be taxed. Marleau said then-Leafs coach Mike Babcock walked him through a cross-border treaty that caps the rate on those bonuses at 15 percent, and framed it as one of the ways Toronto gets elite players to sign.
Marleau was asked about a dinner with team leadership after he signed in 2017, and he said Babcock described the tax cap this way:
“A lever that teams are able to use to get people to come play in Toronto.”
Joseph Brean of the National Post was in the courtroom and reported that Marleau went further, explaining what the 15 percent number did to a free agency that had not included Toronto at all:
“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.”
He had been talking to American clubs until his financial advisors confirmed the treaty was real. Toronto went from an afterthought to the front of the line.
His 2017 contract ran three years and $18.75 million, with $14.5 million of it structured as signing bonus money. Two payments of $3.5 million landed in the first year alone.
Tavares ran the same play a summer later. His seven-year, $77 million contract carried a $15.25 million signing bonus paid out while he was still a New York resident, and the CRA came back in 2022 asking for $6.85 million in tax plus $1.2 million in interest.
That is the whole fight in one line. Tavares calls the bonus an inducement to sign, which the Canada-U.S. treaty taxes at 15 percent. The CRA calls it employment income, which Canada taxes above 50 percent. We laid out the money at stake when the trial opened.
Tax specialists have been picking the case apart all week. Here is a clean breakdown of the CRA’s side:
Justice J. Scott Bodie is hearing the case over roughly two weeks. Marleau, who now works in player development for San Jose, retired holding the NHL record for games played at 1,779.
Every Canadian club selling itself to an American free agent leans on that 15 percent number, which is why one word out of Marleau’s mouth mattered so much. He said the Leafs used the tax cap to entice him. Canada’s lawyers spent the rest of the day arguing it did nothing of the sort.
