New federal budget provisions could force doctors to pay tens of thousands more in annual taxes
In recent weeks, MPs have been inundated with emails and meeting requests from national medical organizations seeking to sway the House of Commons finance committee in their favor. The point of contention, according to a Globe and Mail report, is a controversial clause in a budget bill they say will force doctors to pay tens of thousands more per year in taxes.
Introduced in Finance Minister Bill Morneau’s March 2016 budget, the bill aims to change rules surrounding small business tax deductions. Specifically, it seeks to prevent business owners from using complex partnerships and corporate structures to multiply their access to the small business tax rate – a move meant to address “the ability of high-net-worth individuals to use private corporations to inappropriately reduce or defer tax.”
The change applies to a wide range of professionals who work in a common corporate structure. Doctors argue that provinces encourage specialists to group together as a matter of public policy aimed at improving healthcare results.
Physicians are making the case that the heavy regulation their fees are subject to, coupled with the fact that they cannot pass extra costs down to consumers, should entitle them to an exemption. Based on accounting work done for the Canadian Medical Association, doctors will in some cases be subject to tens of thousands more per year in taxes.
John Feeley, a CMA vice president, reported high levels of concern among members who are not sure whether they will be affected. He agreed with other industry representatives’ prediction of southward migration of doctors. Ray Foley, executive director of the Ontario Association of Radiologists, estimated that the number of exiting physicians could be in the thousands.
Industry organizations have raised their concerns over the provision, expecting that it was a technical oversight that would be amended as needed. However, Morneau’s office said that the government will not accommodate the medical community’s requests for exemption.
Feeley said the CMA is “very disappointed” with Morneau’s position, while other physician organizations were shocked and infuriated. Conservative MP Dan Albas, a finance committee member who raised the issue, said the minister’s policy stance won’t raise more money and will instead put health care at risk. “[The committee who denied the amendments] believe that these structures are about dodging taxes, which they’re not. They’re set up by provinces and territories to make health care more efficient,” he said.
Daniel Lauzon, a spokesperson for the finance minister, said in an email that the provision is not stopping doctors from incorporating in group structures; it just means that as one business, they’ll have to share the small-business deduction. “All it does is clarify that one small business equals one small business deduction,” he said.
According to the CMA, about 10,000 to 15,000 specialists out of Canada’s 80,000 physicians work in the type of income-pooling structures to which the tax change would apply.
Related stories:
BC physicians struggle as province faces healthcare worker shortage
Most small business owners say CPP hike is anything but ‘modest’ – survey
Introduced in Finance Minister Bill Morneau’s March 2016 budget, the bill aims to change rules surrounding small business tax deductions. Specifically, it seeks to prevent business owners from using complex partnerships and corporate structures to multiply their access to the small business tax rate – a move meant to address “the ability of high-net-worth individuals to use private corporations to inappropriately reduce or defer tax.”
The change applies to a wide range of professionals who work in a common corporate structure. Doctors argue that provinces encourage specialists to group together as a matter of public policy aimed at improving healthcare results.
Physicians are making the case that the heavy regulation their fees are subject to, coupled with the fact that they cannot pass extra costs down to consumers, should entitle them to an exemption. Based on accounting work done for the Canadian Medical Association, doctors will in some cases be subject to tens of thousands more per year in taxes.
John Feeley, a CMA vice president, reported high levels of concern among members who are not sure whether they will be affected. He agreed with other industry representatives’ prediction of southward migration of doctors. Ray Foley, executive director of the Ontario Association of Radiologists, estimated that the number of exiting physicians could be in the thousands.
Industry organizations have raised their concerns over the provision, expecting that it was a technical oversight that would be amended as needed. However, Morneau’s office said that the government will not accommodate the medical community’s requests for exemption.
Feeley said the CMA is “very disappointed” with Morneau’s position, while other physician organizations were shocked and infuriated. Conservative MP Dan Albas, a finance committee member who raised the issue, said the minister’s policy stance won’t raise more money and will instead put health care at risk. “[The committee who denied the amendments] believe that these structures are about dodging taxes, which they’re not. They’re set up by provinces and territories to make health care more efficient,” he said.
Daniel Lauzon, a spokesperson for the finance minister, said in an email that the provision is not stopping doctors from incorporating in group structures; it just means that as one business, they’ll have to share the small-business deduction. “All it does is clarify that one small business equals one small business deduction,” he said.
According to the CMA, about 10,000 to 15,000 specialists out of Canada’s 80,000 physicians work in the type of income-pooling structures to which the tax change would apply.
Related stories:
BC physicians struggle as province faces healthcare worker shortage
Most small business owners say CPP hike is anything but ‘modest’ – survey
