13th December 2016

A $70 million tax change that has members of Canada’s medical community fuming has received the support of the country’s highest ranking finance officer. Finance Minister Bill Morneau has come out in defense of the change, saying that it is aimed to simplify the tax rules for all professionals who run small businesses.

Mr Morneau appeared before the Senate National Finance Committee in early December where he received a tongue-lashing by Senators as he attempted to defend his latest budget bill, C-29. Mr Morneau was summoned to address concerns lodged by physician organizations about a tax change that limits how professionals working in a grouped corporate structure are eligible for small business tax deductions.

The government argues that professionals should not be allowed to claim they are a stand-alone small business if they are operating under one corporate entity. The measure was announced in the March budget to quell the ability of ‘high-net-worth individuals to use private corporations to inappropriately reduce or defer tax.’

“We believe the approach we’ve is fair across small businesses. We are not treating physicians in any way different from other professionals or other small businesses”, Mr Morneau told the Senate. “What we’re saying is one small business is able to have one small business deduction, he continued.”

The Finance Minister also affirmed that the tax change related to the small businesses will raise $70 million in new revenue per year. The change applies to a gamut of professionals, but physicians have rallied in an aggressive campaign, arguing that unlike other professions, they can’t pass the higher operating costs onto the consumer. They also contend that having many specialists operating in the same facility, the very reason they’ve been singled out as working within a corporate structure, leads to better healthcare. These joint medical partnerships were created to pool income to cover the costs for healthcare that is needed but not covered by provincial plans.

Many Senators voiced concerns on behalf of a multitude of physicians’ and medical professional’s associations, that such a tax change would have a negative impact on Canada’s ability to keep physicians and specialists in the country. 

One medical association has said that the change would lead to some physicians owing tens of thousands in addition taxes. Another organization warned that the change is a tipping point which, in conjunction with several unresolved financial matters with the provinces, could have many of the most talented Canadian specialists jumping across the border to the United States. 

Furthermore, many physicians feel like the lack of talented doctors and other healthcare professionals will impede support for research and education in addition to hampering the range of care and expertise.