If Patrick Marleau and John Tavares lose their case, they will most certainly seek relief from the U.S. — after all appeals are exhausted — to avoid double taxation. Photo by Rene Johnston/Toronto Star via Getty Images

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I love the anticipation of a hockey game starting: two centres crouch at the face-off dot, the referee holds the puck at arm’s length, waits half a beat and drops it. Nobody remembers the face-off itself as what matters is everything that happens after it.

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This week, a very different kind of face-off happens in a Toronto Tax Court room. After years of battling, the Tax Court of Canada trial pitting former Maple Leafs captain John Tavares and former Leaf Patrick Marleau against the Canada Revenue Agency (CRA) is underway.

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The case isn’t really a fight about whether professional athletes should pay less tax; it’s about whether the CRA can effectively narrow a negotiated Canada-United States treaty provision and, in doing so, make Canadian professional sports teams less competitive.

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Here are the highlights for anyone who needs to get caught up. Part of Tavares’s seven-year, US$77-million contract with the Leafs in 2018 was a US$15.25-million signing bonus for that year, paid while he was still a U.S. resident. He said that bonus was an “inducement” to sign, taxable in Canada at a reduced 15 per cent rate under Article XVI(4) of the Canada-U.S. tax treaty.

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Part of the CRA’s argument turns on the fact that Tavares would only have kept a pro-rated share of the inducement and repaid the rest had he retired early or stopped playing before the contract ran its course.

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The CRA said that obligation makes the payment disguised salary. To me, that gets the logic backward: a repayment clause tied to future performance allocates risk, protecting the team if the player doesn’t deliver the career the bonus was paid to secure. That’s a feature of an inducement, not evidence it was never one.

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Signing bonuses aren’t exclusively used for tax reasons, either. They’re a standard tool for protecting a player against a labour stoppage or other disruption under the collective bargaining agreement since a player still collects the bonus even if the league doesn’t play.

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Some people seem to think that the 15 per cent tax rate Canada is limited to is the end of the story. In other words, Tavares and Marleau only paid that low rate on their signing bonus and thus they took advantage of that loophole.

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False. That’s simply Canada’s treaty-limited share of the tax. Both Tavares and Marleau were U.S. residents at the time and paid full taxation on those amounts. Accordingly, the treaty provision is simply an agreement between Canada and the U.S. as to how much tax each country is entitled to.

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If Tavares and Marleau lose their case, they will most certainly seek relief from the U.S. — after all appeals are exhausted — to avoid double taxation.

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The court is expected to hear from Tavares and Marleau directly over two weeks and from Brandon Pridham, the Leafs’ former assistant general manager and architect of the team’s salary-cap strategy through the Tavares era, former coach Mike Babcock, Tavares’ long-time agent Patrick Brisson of CAA Hockey and Robert DeGregory, associate counsel for the NHL Players’ Association.