Should Provinces Tax Non-Resident Athletes?

Posted: 11 Aug 2004

See all articles by Alan Macnaughton

Alan Macnaughton

University of Waterloo - School of Accounting and Finance

Kim Wood

Tax Professional, Toronto


Fairness considerations suggest that athletes earning income in a country, and therefore benefiting from its government services, should pay some tax to that country on the amount of income earned there. Yet the Canada-US tax treaty provides that no such tax is paid when US residents playing on US teams visit Canada. A long-term solution to this problem is to change the treaty, but a shorter-term solution that is available to each Canadian province is to levy its own tax on this income. Although the precedent of deviation from a tax treaty by a provincial or state government is worrisome owing to the potential increase in tax complexity, three US states and two US cities already tax visiting Canadian athletes.

This article analyzes the policy issues surrounding such a provincial tax, proposes a simplified taxation method in which only the teams file tax returns, and uses publicly available salary data to calculate the amount of revenue to be raised. Athletes would not suffer an increased total tax burden since their US taxes would be reduced by an equivalent amount through the operation of the US foreign tax credit rules. The proposed tax is similar to the Alberta tax on National Hockey League players, with the main differences being that the proposed tax is at a 15 percent rate, also applies to baseball and basketball players, applies only to US-resident athletes on US teams, and could be directed to general revenues rather than given to the teams. A change in the treaty to allow the federal governments of both countries to tax visiting league athletes is also briefly considered.

Keywords: Athletes, nonresidents, personal income taxes, provincial taxes, tax policy, tax treaties

Suggested Citation

Macnaughton, Alan and Wood, Kim, Should Provinces Tax Non-Resident Athletes?. Available at SSRN:

Alan Macnaughton (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
613-996-8267 (Phone)
613-943-5597 (Fax)

Kim Wood

Tax Professional, Toronto

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