When Penny Oleksiak and Andre De Grasse return to Canada with their Olympic medals, they'll be greeted with a hero's welcome from the public and open palms from the Canada Revenue Agency.
The Canadian Olympic Committee awards Olympic athletes with bonuses if they make the podium: $20,000 for a gold medal, $15,000 for silver and $10,000 for bronze. That award is taxable under the Income Tax Act, regardless of whether the athlete is an amateur or a professional.
The debate over whether that prize money should be tax-exempt often flares during both the Summer and Winter Olympics.
Winnings that are considered tax-exempt by the CRA include prescribed prizes, which is "any prize that is recognized by the general public and that is awarded for meritorious achievement in the arts, the sciences or service to the public."
That section was introduced into the Income Tax Act after Canadian chemist John Polanyi won the Nobel Prize in 1986 and, controversially, was going to be taxed on his winnings.
"The Olympics are not considered to be a public service or a prescribed prize under the Income Tax Act," said Jeffrey Steinberg, a partner at Crowe Soberman in Toronto. "Until they change the definition of that section, or cover Olympic medals under it, it's not going to be covered by the Income Tax Act."
William Innes, a tax litigator with Rueters LLP in Toronto, believes the Canada Revenue Agency's position on taxing Olympians' prize money is "outrageous." Mr. Innes says the winnings should fall under the prescribed prizes section of the Income Tax Act because the athletes do offer a service to the public.
"I would think that the average man or woman on the street would hold that somebody getting an Olympic medal is providing a service to the public," said Mr. Innes. "This is national pride. Portraying Canada on the world stage has many advantages and I think it's very important in terms of establishing goals for young people."
However, Lindsay Tedds, an associate professor at the University of Victoria's school of public administration, doesn't see a problem with taxing Olympic medal earnings, regardless of whether the athlete is considered professional or amateur.
Ms. Tedds says amateur athletes, who often incur massive expenditures, can deduct those expenses from their income source.
"I think people start thinking about this in a patriotic aspect, but if amateur athletes are not paying tax on it anyways through all these vehicles we have available to reduce their taxable earnings, I'm not entirely sure exactly what the problem is," she said.
At just 16 years old, Ms. Oleksiak will earn $55,000 for her gold, silver and two bronze medals in swimming. As an amateur athlete, she can place those winnings in an amateur athlete trust fund and defer taxation.
"The value of any funds or other property in an amateur athlete trust is included in the athlete's income on distribution or, at the latest, eight years after the last year in which the athlete competed as a Canadian national team member," said CRA spokesperson Jelica Zdero.
For a professional track star such as Mr. De Grasse, who last year chose to forgo his NCAA amateur athlete eligibility when he signed an $11.25-million (U.S.) endorsement deal with Puma, the Canadian Olympic Committee prize is not a significant part of his income.
"If you have an athlete who is in fact earning several million dollars a year, plus they get this Olympic winning, why shouldn't they pay taxes on it?" said Ms. Tedds. "We have these conversations in this country about how the wealthy should pay their fare share, so let's make sure we're very logical about how this applies throughout our entire tax system."
In the United States, Olympic medalists are not only taxed on their medal winnings – $25,000 for a gold medal, $15,000 for silver and $10,000 for bronze – but also on the value of the medal itself.