If a Canadian kid is any good at hockey, his dream is to play at the Montreal Forum for the legendary Montreal Canadiens. That is, until he talks it over with his agent and his tax adviser, in which case he might want to play somewhere such as California - a place with less of a hockey tradition but also less of a tax bite.
Not only is province Quebec the hockey capital of Canada, it is also the tax capital of Canada. In fact, it has the highest tax rate of any spot in North America. Here's an example. If a player were to be paid $200,000 a year, his after-tax income in California - one of the highest-taxed states - would be $113 ,500; in Quebec the take-home pay would be $96,000. In this case the dollars used are Canadian, but under existing agreements a hockey player who is traded across the Canada-United States border can ask to be paid in either Canadian or US dollars.
Players in other parts of Canada would be hit by similar tax bites, although not as severely as in Quebec, where the maximum tax rate on employment income is 60.4 percent, compared with a maximum of about 50 percent in much of the US (actually, state and local income tax could bring it as high as 66 percent in New York City). On top of that, two years ago the Canadian government abolished income-averaging annuities, which allowed anyone who made a lot of money in one year, from a writer to a hockey player, to buy an annuity to spread the taxable income over a number of years.
What is true for hockey players is also true for business people. Companies operating in Quebec have a great deal of difficulty attracting new talent. First there is the income taxes and then there is a language law that forces children of an English-speaking executive to study in French.
In other parts of Canada, Americans coming to work in the country - for a hockey team or an oil company - face higher taxes, higher housing costs, mortgages that are not tax deductible, and even more tax problems. An American working in Canada has to fill out two tax forms, a US return and a Canadian one.
The difference in taxation has hockey players longing to be traded to teams in the US. Here is part of a confidential memo from an accountant to a hockey player's agent describing what a trade would mean in dollars and cents.
''Mr. X would receive additional cash of $50,000 in each of the next three years if he moved to a US team and kept his present contract. This would be the equivalent of receiving a raise of $125,000 per year from the Canadiens.''
Mr. X did not move. The Canadiens came up with a complicated formula to pay their players so that they can escape the tax burden. After two years of complaining, hockey star, Rod Langway, finally got his way and was traded to Washington.
Nicholas Green is an American businessman who has been in Canada for eight years, and fills out the American income tax form every year. ''It is complicated enough that I don't do it,'' he says. Getting an accountant to do the work has cost as much as $2,000, although now Mr. Green has it done for $900 .