Outraged professionals to push back on tax overhaul

Many use private corporations as financial strategy

Finance Minister Bill Morneau’s proposal to restrict the use of private corporations as a tax- saving vehicle will hit many professionals hard, but especially doctors who are mounting a publicity campaign against it and gathering allies from other affected groups.

Dr. Shawn Whatley, president of the Ontario Medical Association, said MPs can expect to start hearing from the 29,000 practicing doctors in his organization, about 70 per cent of whom have incorporated.

“If we can demonstrate to them that this is a bad idea for a significant number of people across Canada, Members of Parliament need to know that,” he said. “We’re doing that with letters, letters to the editors, a social media campaign ... We’ll have MP visits planned, and I think we’ll also be leveraging our relationships with the provincial members of parliament.”

The leadership of the Ontario Medical Association has published numerous opinion columns blasting the proposal since it was released on July 18. “If implemented, these proposals will make Canada an undesirable place to practice,” Whatley wrote in the Toronto Star. In the Toronto Sun, Dr. Charles Shaver said the changes “could have a major cost impact on their patients and clients,” and said it adds to the “poisonous” climate in Ontario.

The proposed tax overhaul was announced in the dead of summer. Professional associations and tax lawyers have been poring over the details, and have started producing harsh assessments of what it will mean for people who use private corporations as a tax strategy.

Among the changes proposed by Morneau is to crackdown on “income sprinkling,” where a high earner sets up a corporation to catch their income. The corporation’s money is then split among family members as salary or dividends, lowering the overall tax bill. As the corporate tax rate has fallen and the high- income personal tax rate has risen since 2000, the use of such private corporations has sharply spiked, the government says.

Under the new proposal, such money could only be paid out if it was shown the family members had fairly earned it through work or capital i nvestment. The government estimates this change alone would recoup $ 250 million annually in taxes.

Morneau said t he reforms are meant to prevent the wealthy f rom “gaining tax advantages that are not available to other Canadians.” The Department of Finance has started a consultation period on the proposed changes that runs until October.

The Canadian Medical Association is preparing the formal submission to the government on behalf of doctors, but provincial associations are starting to mobilize their members. The doctors association in B.C., for example, has been seeking letters from its physician members and encouraging them to write to MPs and ministers. “Doctors of BC is extremely concerned and will strongly defend the interests of physicians and our patients,” wrote its president, Dr. Trina Larsen Soles, in a call-out for submissions.

But the noise is loudest in Ontario because doctors have already been in a bitter years-long battle with the provincial government over fees — and had only been given the right to incorporate about 15 years ago as a provincial concession in fee negotiations. Now they see that concession evaporating.

Other groups are expected to also strongly push back, including professional associations for dentists, lawyers and accountants.

Corinne Pohlmann, a senior vice president at the Canadian Federation for Independent Business, said many small business owners are affected as well. Her group is still studying the government’s plan, but talks are scheduled on how to jointly organize around it.

“In the past three weeks, we’ve probably had more member calls on this than we’ve had on any issue in a long time at the federal level,” she said. “People are very concerned, so we’re building a whole initiative around this.”

Whatley said the Ontario Medical Association has also been reaching out to members.

“I imagine there are probably dozens of different groups and associations that this is impacting — insurance brokers and accountants — I heard from my own accountant, and he said he was talking with a number of people,” Whatley said. “This is a massive change in Canada and I believe it’s being done in a fashion that is not going to be good for the economy.”