Tax changes unfair burden to doctors

Hey there, time traveller!
This article was published 11/08/2017 (2990 days ago), so information in it may no longer be current.

“It is unfair to now claw back these benefits. It is also disingenuous — scurrilous even — to paint physicians as wealthy tax cheats exploiting ‘loopholes.’”

— Health columnist André Picard, Aug. 1, 2017 in the Globe and Mail

On July 18, Liberal Finance Minister Bill Morneau announced proposed changes to taxes on small businesses and professional corporations. Financial columnist Alan Actan warned that, “They call into question the purpose, really, of having a corporation.” Political strategist and commentator Jim Warren stated the tax increases would “kill much of the entrepreneurial spirit in Canada and thousands of jobs created by small businesses.” In a recent newspaper column, Lorne Gunter warned that Canadian farmers, ranchers and small businessmen would have difficulty willing their businesses to their children.

These proposals could have a major effect on physician manpower, professionals such as lawyers, dentists, accountants, engineers and architects and their patients and clients.

Recall some history: in 2005, the Canadian Medical Association general council passed a motion spurring the association to lobby for pensions for physicians. The effort was led by Dr. Mary Fernando, an Ottawa family physician. On June 15, 2009, there was an MD Pension Action Day. Although doctors in Europe had group pension plans, Ottawa refused to change the tax laws, as Canadian doctors were deemed to be self-employed, independent contractors.

When Ontario doctors pushed for binding arbitration a year ago, provincial health minister Dr. Eric Hoskins reluctantly agreed, but only if they relinquished their right to incorporate individually.

In the 2000 Ontario budget, the policy of extending incorporation to medical professionals was to “level the playing field.” It was not a gift, but was in lieu of fee increases. Soon other provinces also allowed incorporation of professionals, and now 70 per cent of physicians in Manitoba, 69 per cent in Ontario and 60 per cent in other Canadian jurisdictions are incorporated.

Various fee and billing clawbacks have occurred in most provinces. Physicians lack the fringe benefits of unionized employees (and politicians) and many pay huge overhead costs. Now they are likely to be deprived of the financial benefits of incorporation. Ironically, Picard concludes, “But if (governments) adopt measures that make incorporation unattractive and impossible to accumulate retirement savings, then they need to provide an alternative, such as salaries and pensions.” Thus, the federal and provincial governments have created a catch-22 situation.

This may cause some older physicians to retire prematurely. Younger, more mobile ones may vote with their feet and move south of the border. A recent report predicts a shortfall of 34,600 to 88,000 physicians in the U.S. by 2025. Despite Donald Trump, the impasse over Obamacare, concern about guns, drugs, racial strife and other issues, there are still many clean, safe, smaller cities, especially in the Midwest, which would prove attractive, especially with low house prices.

Consider the likely unintended consequences on other professionals and their patients and clients. About 64 per cent of Canadian dentists are incorporated. Unlike physicians, they can set their own fees, at least in private offices. Many provide discounted care to certain groups, such as those on social assistance, refugees, First Nations persons, children and veterans. If they were unable to charge various government agencies more to compensate for these tax changes, how many dentists would totally opt out of offering services to these groups?

Some 43 per cent of Canadian lawyers are incorporated. How many — if the tax changes were implemented — would continue to work for Legal Aid Manitoba? What would be the increased cost to hospitals and to various government agencies that require legal services?

Premier Brian Pallister once again refused to sign the federal health accord; good for him. He still has leverage with Prime Minister Justin Trudeau. He should collaborate with federal Conservative leader Andrew Scheer in defeating these proposals. Of note is that shortly after they were announced, Scheer visited the clinic of Dr. Kulvinder Gill, a physician in Brampton, Ont. He toured the clinic and spoke to all the staff so as to fully comprehend the negative ramifications of these new tax changes on doctors and on patient access to care.

Hopefully, with the efforts of Pallister, Scheer and many others, Morneau will be open-minded to these legitimate criticisms. Physicians deserve to be treated with fairness and respect, as do other professionals and small business people. Otherwise, the public will suffer in a multitude of ways.

As Milton Friedman warned, “One of the great mistakes is to judge policies and progress by their intention rather than their results.”

Ottawa physician Dr. Charles Shaver was born in Montreal. He graduated from Princeton University and Johns Hopkins School of Medicine. He is chairman of the section on general internal medicine of the Ontario Medical Association.