Tax reforms will hurt doctors, small biz
Most Canadians aren’t worried about the federal Liberals’ plan to restrict the use of private corporations as a tax-saving vehicle, but for those citizens who have incorporated — professionals and small business owners — the changes would be catastrophic and would represent yet another hurdle for private initiative and enterprise.
In July, Finance Minister Bill Moreau introduced reforms that would tighten restrictions on the three ways people use private corporations to reduce taxes: splitting income among family members, keeping investment income inside a corporation to take advantage of lower tax rates, and converting dividend income into capital gain.
The proposed reforms aren’t about tax fairness but about finding more revenue for the government, revenue Moreau says is being lost as Canadians who operate private businesses increasingly choose to incorporate. He believes the federal government could recoup $250 million alone from changing the rules on income splitting.
Some of the incorporated Canadians are Ontario doctors. Approximately 70 per cent of the Ontario Medical Association’s members (more than 20,000 doctors) are incorporated. They were permitted to incorporate by the Ontario government 15 years ago in exchange for a freeze on the fees the province paid them for their services. Incorporation has helped them deal with that impact, but if the federal Liberals have their way, that benefit also would be substantially reduced.
It’s not only doctors who have incorporated, but farmers, plumbers, dentists, accountants, small business owners, anyone who is self-employed and building a viable economic existence outside of employment with government or big business. They are private entrepreneurs who have risked capital, time and skills to build a practice or a business. They are usually responsible for funding their own pensions and paying their own health costs.
It’s unfortunate that details of the proposed reforms were launched in the dead of summer, a cynical attempt by the Liberals to keep the changes as quiet as possible.
A consultation period is in place until October, but it’s too short, according to the Canadian Chamber of Commerce’s CEO, who calls the reforms “the most radical tax changes in 50 years.”
Moreau’s reforms likely will find approval in the House of Commons, which enjoys a Liberal majority and whose caucus probably views the tax reforms as a righteous blow against privilege and wealth. — Peter Epp