Canada: Dishing Dimes And Not Turning Over Too Much (In Taxes)

Last Updated: April 10 2015
Article by Adam Scherer

"Why hasn't Toronto been a place that's attractive for free agents? Because you have to pay Uncle Sam and Queen Elizabeth in taxes."

- Jalen Rose, former Toronto Raptor, current NBA broadcaster.

We don't teach enough American history in school, we don't have ESPN on our televisions, and our taxes make it crippling for anyone to play here. These are just some of the excuses I have heard in my twenty years as a diehard Toronto Raptors fan, for what prevents us from fielding a competitive team.

While I can't comment on our education system or television broadcast regulations, I can weigh-in on the tax situation. In this article I will debunk some of the tax myths that are crippling enough to prevent Toronto's own NBA franchise from being competitive. (The 2014-2015 season notwithstanding!)

It is very easy for sports pundits like Mr. Rose to simply compare federal, provincial and state tax rates and sensationalize the differences. Those differences do make for great headlines. For example, in Ontario, the top combined federal and provincial tax rate is 49.53 per cent. By contrast, the U.S. federal tax rate is only 39.6 per cent. Coupled with the fact that some states, most notably Florida and Texas, have no state tax, that's a whopping 9.93 per cent difference in some instances.

So, when a certain point guard faced a decision last summer to re-sign with Toronto, or move to Miami or Houston to play for $12 million a season, did he have 1.2 million reasons per year to leave Toronto for greener pastures?

That's how it looks to a lot of people, but looks can be deceiving. Let's take a closer look at how basketball players are actually taxed in Canada.

To illustrate, assume that the point guard remains a non-resident of Canada and a resident of his home state, Pennsylvania. (Most players leave their families and belongings behind in the U.S. and come to Toronto only long enough to play out the basketball season. They then return home to the U.S. for the off-season.)

Canadian tax rules state that a non-resident is taxable in Canada if he is employed here - specifically, if he performs any of his duties in Canada. That means that any team player that plays games in Canada is subject to Canadian taxation, whether he is a member of the Cleveland Cavaliers or Toronto Raptors. Does that mean that Lebron and every NBA player that comes to the Air Canada Centre for one or two nights a year have tax bills to pay to the Canadian government? Happily for them, this is not the case. A tax treaty between Canada and the U.S. exempts players of U.S. teams from paying taxes on those games.

By the same token, a U.S. resident on a Canadian team who performs a portion of his duties outside of Canada would not be subject to Canadian taxation on those days. Therefore, a Raptors player does not pay any Canadian taxes on income he earns for games he plays outside of Canada - effectively, his road games.

The team carefully calculates duty days and monitors where all players perform their service. In the 2014 calendar year, Raptors players spent roughly 70 per cent of their time in Canada. Therefore, a U.S.-resident Raptor pays tax to Ontario and Canada on only 70 per cent of his total employment income.

The player receives credit for the taxes he paid to Canada when he files his U.S. return - so he avoids double taxation. Effectively, a Raptor player ends up paying the higher of the two tax rates between Canada and the United States (factoring in his U.S. state of residence) on his income.

The comparison of a player's tax burden between Canada and the United States does not stop with simple rates. Other significant factors come into play. Employees in Canada are also very restricted on the expenses they can claim against their income. This is not the case for athletes in the U.S., who can claim agent fees and training expenses as deductions against their income. Agent fees generally run at least three per cent of a player's income - potentially a big number! This further inflates the Canadian tax burden as compared to that of the United States.

But countering this effect is the United States' rising income tax rates. It was not long ago that the top federal tax rate was only 35 per cent. The U.S. now has a top federal rate of 39.6 per cent and a Medicare tax rate of 2.35 per cent. While Canada's social security costs (Canada Pension Plan and Employment Insurance premiums) are marginal and less than their corresponding taxes in the United States (Federal Insurance Contributions Act), there is no meaningful Canadian equivalent to the Medicare tax that exists in the United States. Further, an employee of a U.S. organization pays this Medicare tax on his entire income (including the other 30 per cent of his income). In addition, many U.S. states have their own tax regime. California, for example, has a top state tax of 13.3 per cent!

Ignoring contract restructuring and using all the variables described above, we computed the tax bill for the point guard on a $12 million per year contract. If you believe the rumours, the point guard had options to play for the Houston Rockets, the Miami Heat and the Los Angeles Lakers. We also analyzed what would have happened had he been traded to the New York Knicks.

To start off, no team in the NBA can compete with the tax advantages teams have in states where there are no personal taxes. The Raptors are no different. Our point guard is going to pay approximately $5.92 million in taxes and social security payments per year on his contract. For comparative purposes, had that player signed with the Rockets or Heat, he would have only paid $5.12 million in taxes and social security. That's a significant $800,000 difference in taxes alone. Fortunately for the Raptors, league rules allow teams to sign their current players for more money than any other team. Therefore, while the point guard may have been able to save some tax dollars by signing with a Florida or Texas based team, he may have had to take less money to do so.

However, what if that same point guard signed with the Lakers? In our example, he would have been slightly worse off financially. In that case, he would pay an additional $70,000 per year in taxes. What about that trade to New York that never happened? That trade would have resulted in a $5.86 million tax bill - a scant $63,000 savings compared to what he pays as a Raptor.

Jalen Rose isn't entirely wrong in his assessment; Florida, Texas and other states without state taxes are examples where large discrepancies still do exist. However, as illustrated above, these added tax costs for a player on the Raptors would be no different than if he played for the Lakers, Clippers, Kings, Warriors, Knicks or Nets.

Rising U.S. tax rates and steep Medicare costs have significantly narrowed the gap between Canadian and U.S. taxes for professional athletes. There may also be other ways for athletes to reduce their Canadian tax bills even further. This may involve restructuring their contracts to receive a signing bonus. Signing bonuses get significant preferential tax treatment under the tax treaty and can be taxed at a maximum 15 per cent Canadian tax rate. A simple signing bonus can drastically affect the overall taxes a Toronto Raptors player pays. Can we now begin to attract future free agents with the right tax advice and marketing? Can we structure our contracts to lower our tax rates to compare with, say, that of Oklahoma City and thereby attract new talent? Time will tell.

It is time to eliminate taxes as a potential reason for athletes to stay away from Canada. Current and future Toronto Raptors players should be able to focus on factors other than taxes when deciding to play here. We have a winning franchise, with a rabid #WeTheNorth fan base packing the Air Canada Centre all winter long; not to mention a beautiful city with a cultural and culinary scene that easily rivals that of any major American centre.

About the Author

Adam Scherer is a Partner in Crowe Soberman's Tax group.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Adam Scherer
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.