British Columbia

Tax loophole is 'simply wrong,' says Vancouver doctor backing federal reform proposal

A Vancouver doctor is backing Ottawa’s proposed tax changes for small business owners, calling on the need for a more equitable tax system.

Loophole 'disproportionately advantages' some doctors in incorporated practices, says Dr. Robert Woollard

Finance Minister Bill Morneau is proposing federal tax reforms on small businesses, which some doctors support. (Andrew Vaughan/Canadian Press)

A Vancouver doctor is backing Ottawa's proposed tax changes for small business owners, calling on the need for a more equitable tax system.

Dr. Robert Woollard, a family practitioner and professor in UBC's Faculty of Medicine, is one of 280 doctors who have signed a petition that says the tax revenue gained in closing off loopholes for incorporated practices would pour money back into the health-care system and fund social programs.

But the group says it has concerns with the government's approach and wants to avoid penalizing doctors who have held their savings in corporations. 

"We wouldn't want it to be characterized as a simple us versus them on this particular aspect of tax policy," Woollard told host Rick Cluff on CBC's The Early Edition.

Tax loopholes are 'simply wrong'

Finance Minister Bill Morneau's announcement in July — which is still under consultation — has drawn condemnation from doctors who argue the changes would affect their livelihoods.

The Canadian Medical Association estimates that 60 per cent of physicians are incorporated.

The proposed changes include cracking down on "ìncome sprinkling," in which incorporated small businesses shift a portion of income to family members to get taxed at a lower rate.

Another change is curbing passive investments in stocks and real estate.

The third change would eliminate the ability to convert a corporation's earnings into capital gains, which are taxed at a lower rate.

"There's no question that this particular loophole disproportionately advantages those who don't need the advantage. And that's simply wrong in Canadian terms," Woollard said.

But doctors denouncing the proposal say they already deal with significant overhead and don't get the same benefits as public-sector employees such as extended health, parental leave or pensions.

They also incur significant student debt and suffer higher rates of burnout.

Reworking the proposal

Dr. Woollard agreed the government needs to tackle those issues head on.

"Since we're hitting the pause button, let's look at the whole package, rather than piecemeal try to do it," he said.

The group has called on the government to outline a clear transition plan for saving held in corporations, since doctors may have foregone contributions to saving vehicles such as TFSAs or RRSPs.

"It''s unfair to simply shut that off and not be creating alternatives," Woollard said.

The group also wants provinces to review options for access to extended health benefits, parental leave and pension plans for all Canadians and to tackle increasing medical student debt.

With files from CBC's The Early Edition