Proposed tax changes will hurt MDs, patients

CHARLES SHAVER

Liberal federal Finance Minister Bill Morneau’s proposed tax changes to 300,000 corporations across Canada will impact the financial wellbeing of fish harvesters, farmers, small businesses, and professionals such as physicians, dentists, lawyers, engineers, architects and accountants.

They would create a 73 per cent effective tax rate on the earnings from investments held inside professional corporations.

Postmedia columnist Jim Warren, a Liberal strategist, said such changes will “kill much of the entrepreneurial spirit in Canada and thousands of jobs created by small businesses.” Physicians across Canada have long been the victim of income constraints imposed by government, nowhere more than in Ontario, with billing clawbacks and cuts to various fees of more than 50 per cent.

Ontario MDs won the right to incorporate about 15 years ago — and the tax benefits it brings to help them pay for their own retirements and their own and their family’s medical benefits — in exchange for a temporary freeze on medical fees.

Now, the Trudeau government is poised to upend this agreement by changing the rules.

Many of Canada’s physicians are incorporated, ranging from a high of 75 per cent in Alberta and Saskatchewan to a low of 47 per cent in Newfoundland and Labrador.

Doctors across the country are in limbo, not knowing whether to take on new financial risks, such as opening new clinics, signing leases, purchasing equipment, and hiring nurses and other staff.

In Canada, because the majority of doctors pay their own overhead, physicians have traditionally been viewed as independent contractors.

Now, as they face losing the tax benefits of incorporation, perhaps it’s time to demand salaries with full benefits from governments.

What should be the base annual salary? Let’s make some comparisons.

A federal judge earns $308,000 annually, a medical officer of health about $290,000, the chief of staff of an Ottawa hospital $546,000, plus benefits. Of course, salaries would have to be augmented for specialists, years of training and seniority.

The contract could cover a standard 37.5-hour work week, with extra pay for overtime, nights, weekends and on-call availability. Provinces would have to buy up existing private clinics.

As government employees, the government would provide doctors with malpractice insurance and a benefit package, including sick leave, long-term disability, maternity and paternity leave, study leave, vacations, a dental and supplemental medical plan, and an indexed, defined-benefit pension.

Morneau — like Prime Minister Justin Trudeau — was born into wealth, and may have difficulty relating to professionals who achieved success only by years of education, hard work, and the assumption of risk when setting up small businesses, buying equipment, hiring staff and meeting payrolls.

Before he resigned to become finance minister, Morneau was the executive chairperson of Morneau Shepell, Canada’s largest human resources and outsourcing firm, providing more than 20,000 organizations with pension and employee benefit programs. This adds to the irony of his proposals.

Shouldn’t professionals and small business people be allowed to provide for their own retirement and their children’s education, by using the tax benefits of incorporation Morneau wants to end? This, as opposed to having these and other costs paid by their employer, the business Morneau Shepell is in.

Let’s hope provincial ministries of health demand Morneau be more receptive to these criticisms.

If what he has proposed becomes law, retention of existing physicians will be costly, with major manpower shortages and increased wait times for the public. — Charles Shaver practises medicine in Ottawa.