Former major league baseball catcher Russell Martin is at risk of being fired by the Canada Revenue Agency (CRA), which is seeking dollars from him over differing interpretations of a previous tax return.
According to the National Post in a lengthy article published on Thursday, three former Toronto Blue Jays color bearers are on trial before federal authorities: Josh Donaldson and Jose Bautista, along with Martin, have to justify the figures they submitted to federal authorities CRA. In the case of the first two, they will present their arguments to the court in July and the dispute relates more specifically to amounts to be deducted from their total income through contributions to a pension arrangement.
Florida residents earned $42 million and $28.65 million, respectively, in the years considered by the CRA in 2015-2017. They disagree with the government agency about their time spent outside of Canada: At the time, they said they spent 40% of the year essentially “working days” in the country. According to the CRA, the deductions should have been made before the time involved was calculated, while players tend to claim that they should be made after the fact.
In legal documents obtained by the newspaper, the defendants believe that the CRA’s interpretation is inconsistent with “the structure, object, spirit and purpose” of the Income Tax Act. At the same time, they regret the double taxation. They add that contributions to the pension scheme should only be deducted from the Canadian portion of income tax because they remain in the United States for the remainder of the year.
The upcoming ruling could affect Martin’s tax return by almost $5 million up or down, compared to $2.58 million for Donaldson. If it’s any consolation, they’re in a better position than Bautista, who was rejected by the CRA for $16 million in dues paid over four years.
Incentive not to play in Canada?
The outcome of the case could have an impact on many athletes living abroad. According to lawyer Marie-France Dompierre, who is defending Martin and Donaldson, they will hardly want to make a living in Canada, a country with a higher tax rate than others.
“One of the issues that athletes working in sports leagues in North America often face is that as employees they face massive tax implications. The issue is crucial in most negotiations between Canada-based teams and players based elsewhere, she said in an article she wrote last year. The focus of these discussions is often the possibility of tax deferral. This could actually allow Canadian teams to attract talented athletes if tax rates are reduced to levels similar to those affecting club players in the United States.