The Standing Senate Committee on National Finance met this day at 6:49 p.m., publicly and in camera, to continue its study on the Minister of Finance’s proposed changes to the Income Tax Act respecting the taxation of private corporations and the tax planning strategies involved.
Senator Percy Mockler (Chair) in the chair.
The Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on National Finance.
My name is Percy Mockler, I am a senator from New Brunswick and chair of the committee.
I wish to welcome all of those who are with us in the room and viewers across the country who may be watching on television or online. As a reminder to those watching, the committee hearings are open to the public and also available online, on the Senate website, at sencanada.ca.
Honourable senators, I would like to ask each senator to introduce themselves, starting on my left.
Senator Moncion: Lucie Moncion from Ontario.
Senator Oh: Senator Oh from Ontario.
Senator Pratte: André Pratte from Quebec.
Senator Forest: Éric Forest from the Gulf region of Quebec.
Senator Andreychuk: Raynell Andreychuk, Saskatchewan.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicole Eaton, Ontario.
Senator Neufeld: Richard Neufeld, British Columbia.
The Chair: Thank you, senators. And the deputy chair.
Senator Cools: I’m the deputy chair. My name is Senator Anne Cools, from Toronto. That’s in Ontario.
The Chair: Thank you, deputy chair. Now, I would like to recognize the clerk of the committee, Gaëtane Lemay, and our two analysts, Sylvain Fleury and Alex Smith, who team up to support the work of the Finance Committee.
This evening, our committee continues its special study on the proposed changes to the Income Tax Act, respecting the taxation of private corporations and the tax planning strategies involved, changes that the Minister of Finance proposed during the summer of 2017.
Today, we have before us national organizations from the health sector, along with one doctor from Vancouver. They were asked to give their opinion on the impacts of the proposed changes.
To the witnesses, thank you for accepting our invitation to share with us your comments, your views and your analysis.
As chair, I would like to welcome first, from the Ontario Medical Association, Dr. Shawn Whatley, President.
Dr. Magalie Dubé, member of the Canadian Association of Radiologists.
From the Canadian Dental Association, Dr. Larry Levin, President.
Dr. Laurent Marcoux, President of the Canadian Medical Association.
From the group called Concerned Ontario Doctors, Dr. Kulvinder Gill, President.
Finally, from Vancouver, by video conference, Dr. Rita McCraken, family physician and health care advocate.
Welcome, and thank you for being with us this evening.
I would like to ask each and every one of you to make opening remarks. We’re giving you a maximum — not a minimum, maximum — of seven minutes each in order to permit the senators to ask questions following the full presentation of your comments. We will start first with Dr. Whatley.
Dr. Shawn Whatley, President, Ontario Medical Association: Thank you, chair. My name is Dr. Shawn Whatley, and I’m the President of the Ontario Medical Association and a family doc in Mount Albert, Ontario. The OMA represents 30,000 practicing physicians and advocates on behalf of doctors, as well on behalf of the people of Ontario, in the pursuit of good health and excellence in health care. Thank you to the Senate committee for the opportunity to present.
I want to commend the committee for proceeding with these hearings. As it stands, these changes would be the most significant change to the taxation of private corporations since 1972. Changes this significant deserve deeper review than a summer consultation, and this study that you’re doing is exactly what is needed.
Approximately two thirds of Ontario physicians have incorporated their practices as medicine professional corporations, or MPCs. These corporations contribute to the economy. On average, a physician creates the equivalent of approximately four full-time jobs, generates approximately $205,000 in GDP and adds more than $50,000 in tax revenue to the government, at all three levels, from their spending on overhead. In the year 2000, the Ontario government granted physicians and other professionals the ability to earn professional income through a corporation, and then, in 2005, the Ontario government further amended the Ontario Business Corporations Act to expand the list of eligible shareholders in MPCs to include family members.
The proposed changes that were tabled by the federal government will have significant consequences for incorporated physicians, many of whom use tax savings from the MPC to operate their practices. Removal of these tax planning strategies would not only impact physicians and their families, but, most importantly, the care that physicians provide to patients.
Physicians are mobile. They can relocate to the United States or to other jurisdictions. Other jurisdictions have lower marginal tax rates, favourable tax brackets and the ability to be taxed at the family level. North American jurisdictions continually compete to attract and retain physicians for their growing and aging populations. Removing tax incentives in Canada will discourage physicians from considering practicing here and, ultimately, jeopardize the health care Canadians deserve.
In Ontario, we have lived through the consequences of government decisions that did not assess the impact on patient care. In the 1990s, we got to the end of the decade with 1.2 million patients without a family doctor. These patients ended up in the emergency department or walk-in clinics, and I can tell you from personal experience that diagnosing diabetes in the emergency department became commonplace. Our hospital had to set up special diabetes clinics just because our patients could not find follow up with a family doc in the community. We can’t afford to go back to that.
Given the significant impact that these changes will have on the care we provide, we recommend that the government halt these changes until a full economic impact assessment is completed.
With respect to passive investment, we appreciate that the finance minister has reconsidered the original proposal regarding taxation of passive income inside a private corporation. Most physicians use their MPCs as a vehicle to fund retirement and to operate and expand their practice. The proposed $50,000 tax-free threshold, which is not indexed to inflation, would easily be reached by anyone who uses a private corporation for long-term retirement savings. Hence, the proposed $50,000 threshold would prevent physicians from using their MPC to draw income upon retirement. The threshold creates similar problems for physicians who use passive investment on income to fund maternity leave, short-term disability or educational leaves.
Physicians also use the income earned through their MPC on passive investments to address future large-scale purchases, such as technology or the installation and operation of an electronic medical records system. These purchases allow us to improve the care that we provide for patients. These proposals put that ability at risk. Corporations often require several years of savings to make these massive purchases. The taxation of passive corporate income would penalize this type of planning, and unspent corporate income would now be taxed at a higher rate. Again, we appreciate the minister’s willingness to reconsider the initial proposal, but this amendment, proposed last week, is flawed and creates a taxation scheme that is unnecessarily complicated and punitive.
As I mentioned, these are significant changes. We do not believe that the government has done necessary research. We strongly urge the government to leave the legislation regarding passive investments in its current form. If the government decides to move forward and not listen to the small business community, then we implore the government to increase the threshold and not to impact patient care.
Regarding income splitting, the consultation document proposes amendments that would remove the ability to split. The consultation document uses the example of Jonah and Susan to compare the income tax paid by an employee and a corporation owner. This comparison is flawed. An employee cannot be compared to someone who owns a business. Equating the tax treatment of a self-employed incorporated business owner with a salaried employee ignores the fundamental tax differences between the two. This comparison provides no recognition of the risks associated with starting and operating a business. For physicians, these risks include incurring and personally guaranteeing debt for startup, staff recruitment, provision of staff benefits, rent, equipment and overhead costs. If the government chooses to ignore the realities of incorporated physicians, at a minimum, we strongly urge the government to include a spousal exemption on income sprinkling for both income and dividends.
In conclusion, in addition to the 20,000 incorporated Ontario physicians, the proposed changes will negatively affect hundreds of thousands of Canadians who operate small businesses. On behalf of all Ontario physicians, I strongly encourage all parliamentarians to take the necessary time to look at how these proposals will impact patients.
Thank you for the opportunity to speak today, and I appreciate all the effort you’re putting into learning more about this. I would be happy to take questions.
Dr. Magalie Dubé, Member, Canadian Association of Radiologists: My name is Magalie Dubé. I am here to speak on behalf of the Canadian Association of Radiologists, the national voice of radiologists in Canada, with over 2,500 members. Over the last 80 years, we have been dedicated to maintaining the highest standards of care, promoting patient safety and helping radiologists contribute to the very best health care for patients.
Radiology is a key component of the health care system. We are the ones who specialize in interpreting and producing reports of X-rays, ultrasound, mammography, MRI, CT scans for patients around Canada, in urban and in rural settings. Our health care system continues to be under pressure, and we are worried about increased wait times and access for patients to needed diagnostic services.
I am pleased that the Standing Senate Committee on National Finance is taking the time to fully review the government’s proposed changes. I am a radiologist who practises in both Ottawa and across the river in Gatineau where I acquired two radiology clinics in 2014. I am the mother of two teenagers who, like many people, had to take time out of my career to help raise children.
When these tax proposals were announced in July, I was fearful that if they were implemented as is, I might not be able to continue to save for my retirement and employ people in my clinics.
Many radiologists are small business owners too, like me. I employ 15 women in my clinics to assist me in providing care to patients. As a small business owner, I take the risks of the business. We make investments in the business both actively and passively.
Passive investment does allow me to potentially weather any storms and save for my retirement. While I do put money away into an RRSP, the passive investment has allowed me to grow my business and to offer more services to the Outaouais community right across the river.
The proposed changes would still affect me and could act as a disincentive for further business investment. Some of my colleagues, as I am sure you have heard, would consider shutting down their businesses.
I want to thank you again for this invitation.
It is truly an honour to make this presentation to you today.
Especially in October, which, as you know, is Breast Cancer Awareness Month. Many of you know women who had or have breast cancer. I myself am a breast cancer survivor. As in the case of many diseases, it is imperative that patients receive timely access to medical imaging so that doctors can formulate a treatment plan specific to that patient.
As many of you know, radiology is a much-regulated field, and for good reason, as it involves radiation that can be dangerous if not properly managed. A few months ago, I had to make a decision to upgrade my mammography unit in my clinic to the newest technology in order to adhere to the highest licencing standards. This would require an investment of $250,000 that my business — not the government — will have to make in the next few weeks, with very small return. However, I am torn as I make the decision, since the community need for mammography is enormous. In Gatineau right now, if a woman calls to have a mammography performed, the waiting time is close to a year. As I know from my personal experience, the wait for a diagnostic test when you have a breast lump, or any other health issue, is a significant cause of anxiety and distress for most Canadians. My decision may also impact my employees — all young women. Should I invest in a new mammography unit to better serve my community, or shall I postpone the acquisition in these times of financial uncertainty in order to protect my retirement plan, my family and to ensure the financing of my children’s post-secondary education?
The government’s proposed changes to the small business tax structure would have had a financial negative impact on many radiologists across the country. We have seen many people, organizations and parliamentarians voice their concerns that these proposals need to be reviewed over a longer period of time given the impact across many sectors of the economy.
As we continue to digest the recent changes to the tax proposals that the government announced last week, here are some facts: Unlike salaried employees, doctors pay for their own medical coverage, extended health benefits, and must entirely fund their own pensions; doctors employ administrative staff, nurses, medical radiation technologists and ultrasonographers in their clinics. In a recent study of New Brunswick physicians, 82 per cent said that they would consider scaling back their practice or reduce hours if these proposals go forward.
After taking some time to review the impacts of these changes for doctors and radiologists, our association began to take action to let parliamentarians and government officials know our position. We partnered with our colleagues at the CMA to encourage doctors to write to their MPs. We joined the broadly based Coalition for Small Business Tax Fairness that includes over 70 organizations to better advocate on the business impacts and signed our name to a letter to Minister Morneau. We had meetings with members of Parliament, government officials and the Prime Minister’s Office. We asked our members to relay their personal stories of how these changes might affect them.
We recognize some movement and changes announced last week by Finance Minister Morneau in an attempt to lessen unintended consequences of the tax changes. We will not be able to know the impact of these changes fully until we see actual legislation. Upon initial review, our members still have serious concerns regarding the proposals around passive income. The adjustment to create a threshold of $50,000 on passive income does not go far enough.
Mr. Chair, we have taken this issue very seriously. In short, I continue to be concerned that physicians and radiologists, due to the capital-intensive nature of our practices, will be unfairly hit hard by these proposed tax changes at a time when we’re looking to recruit and retain more doctors. We are small business owners as well, and these changes could negatively impact health services across Canada.
It would be crucial to see a complete economic impact assessment of the suite of proposed changes before any financial decisions are made. Have a look at the entire Income Tax Act for other possible changes, and a full spousal exemption on income sprinkling rules for both income and dividends would be useful.
We are looking to the Senate to provide some advice, a sober second thought, to the House of Commons. Do not implement these proposed changes, even as amended, at this time. Take a much broader look at a wider policy that could provide society with better value for the money.
Thank you for your invitation and the time you have given me. I will be pleased to answer your questions.
The Chair: Thank you very much, Dr. Dubé.
Thank you, Mr. Chair and members of the committee.
The Canadian Dental Association is the national voice of dentistry, representing the profession and 18,000 practising dentists together with the provincial dental associations across the country. On behalf of our members, I thank you for engaging in this vital study and for the opportunity to present to you on this matter.
They say a week is a long time in politics, and on the topic of the proposed tax changes for small businesses, last week was unquestionably one of the most eventful weeks in recent memory. From the outset of the government’s consultation this past July, the CDA and many other organizations outlined that a 75-day consultation period on changes that would profoundly change tax policy for small businesses in Canada was insufficient. The initial discussion paper was a highly technical document. Moreover, it was multifaceted, with multiple proposals. Subsequently, there was last week’s series of announcements by the government to reflect upon some of the input they received through this consultation.
We appreciate the intent of last week’s announcement and recognize that some of the amendments announced may help to mitigate some of the most negative aspects of the initial proposals. However, I feel it is very important that we underline that the tax change policy, the change that would emanate from this process, may be profound but remain unclear. Indeed, some of the initial proposals include draft legislation while others do not, creating uncertainty with regard to the potential impact of a full suite of tax legislation changes versus individual legislative changes.
Given that last week’s announced changes to the initial proposals are not accompanied by draft legislation, we are left to respond to statements of principle. This leaves us with an even higher degree of uncertainty and concern that we won’t have an opportunity to comment on subsequent legislation until it’s already introduced in the house.
Moreover, there is a strong indication that the legislation to enact these changes will come forward in the context of a budget implementation act. Including profound tax policy changes within the context of budget legislation will not allow the house or the Senate the time to adequately perform its duties to review the legislation, nor will it allow stakeholders to be appropriately consulted.
A 75-day consultation period is simply not sufficient to engage meaningfully on these changes. A week to react to potential amendments to the initial proposals is also insufficient to us and certainly for this committee as well. At the very least, the government should complete an economic impact assessment of a fully elucidated package of changes and should delay any implementation until this assessment is complete.
Beyond the significant concerns around the process, I will offer a few comments on the substance of the proposals.
The concept that underpins all discussion on these potential changes is based on a false equivalency, in comparing a salaried employee to the owner of a Canadian-controlled private corporation, a CCPC. The comparison does not account for the added benefits enjoyed by salaried employees and subsidized by employers, including paid vacation leave, retirement benefits and employment insurance, among others. It also does not account for the stability of predictable remuneration for employees versus the economic fluctuations faced by business owners.
Moreover, the focus on the individual tax burden does not account for the added costs in establishing a small business nor the risk assumed by small businesses. It also does not recognize the economic activity generated by small businesses, which creates added tax revenues. For dentists, this includes capital expenditures to maintain a dental clinic — in essence, a “mini hospital.”
In the government’s most recent announcements, we were encouraged by the recognition of the role that passive investments play in small businesses. However, we would like more discussion on the particulars of the announced threshold of $50,000 of passive income. Ultimately, we believe that allowing small businesses to invest passively is good for the ongoing stability of these businesses and that the government should be circumspect about the limitations they place on these investments. It is unclear if this threshold would be purely annually or if it could be rolled over to reflect year-to-year variances in the business. We would also like to understand if the cap will be adjusted in a subsequent year for inflation. If there is a cap being placed on these investments, let’s be sure that it’s appropriate and allows businesses to build a proper reserve for unexpected financial or personal crises.
Dental offices are small businesses, providing middle-class jobs for tens of thousands of Canadians. They purchase supplies and equipment from Canadian suppliers, and they are strong contributors to the economy, both locally and nationally. It is our view that the government’s initial proposal took too narrow a view of the impacts, without examining the deeper social or economic impact of such changes on small businesses and their employees.
As we have stated from the outset of this process, the Canadian Dental Association believes that changes of this magnitude deserve a full hearing. We would strongly recommend that the upper chamber remain vigilant on this issue and that any subsequent legislation receive your highest degree of sober scrutiny.
Thank you for your time. I would be pleased to answer any questions you may have.
The Chair: Thank you. I will now give the floor to Dr. Laurent Marcoux, of the Canadian Medical Association.
Dr. Laurent Marcoux, President, Canadian Medical Association: Honourable senators, Mr. Chair, thank you.
On behalf of the Canadian Medical Association, thank you for inviting us to appear today. I will share our response to the tax reforms proposed by the Government of Canada on July 18, and our reactions to the more recent announcements.
As we indicated in our brief to the government, the CMA is opposed to the tax proposals as they will have a significant destabilizing effect on doctors’ practices and small businesses. Doctors’ practices employ more than 137,000 Canadians and provide medical infrastructure that is necessary for the smooth operation of our health system. More than 54,000 doctors in all parts of Canada have incorporated their practice. So this remains a top priority for the CMA, and our members are very concerned.
During the consultation period, the CMA asked the federal government to hold off on the proposals pertaining to Canadian-controlled private corporations. It was our opinion that a comprehensive analysis of the changes is needed, which was simply not possible in the 75-day consultation period.
We also asked the government to conduct a detailed examination to ensure that this bill can meet the need for a safety net, as well as policy objectives, without major unanticipated consequences. The government has indeed changed its initial position somewhat, but these changes are so complex that they will be difficult to respect, follow and administer.
The planned pace of implementation of these changes still concerns us greatly. Let us not forget that the proposed tax changes are the most far-reaching changes to small businesses taxation in 45 years.
Given the great shortage of detailed information, it would not be prudent to implement the changes as currently planned. We certainly understand the government’s objective of fairness in the tax system. We cannot however support one-off changes that could destabilize doctors’ practices, which serve a crucial role for Canadians. Since there is no consensus on the meaning of “tax fairness,” we fear that the proposed changes might be fair for one sector of activity, but unfair to another.
That is why we continue to ask the government to conduct a detailed evaluation of the impact of the proposed changes and hold a comprehensive consultation of all Canadians once the draft bill has been published. Moreover, after a preliminary analysis of the announcements, we believe that the following changes should be made.
First, we believe that the government must define the current legislation pertaining to passive investments. Limiting income from investments is unprecedented. Small companies must be able to retain some undistributed profits to ensure the viability of their businesses and to create a safety net. The government has recognized the role of passive investments in funding sick leave and maternity leave, as well as long-term retirement plans, and we encourage that. This issue is nonetheless a source of concern and uncertainty for our members. The current agreement that pertains to the taxation of Canadian-controlled private corporations, CCPC, allows doctors in Canada to take measures for self-funded revenue protection in order to cover their personal, professional and business needs. These agreements enable them to provide quality health care from coast to coast. Even the provincial governments encouraged and supported them in their efforts in order to limit doctors’ fees.
If the government is determined to limit passive investments, the CMA will insist that the limit be increased. Moreover, the cap should be adjusted to inflation and applied cumulatively. Investments are volatile by nature. We do not think it is fair for a CCPC with passive income of $50,000 over two consecutive fiscal years to pay less tax than a CCPC that has no passive income one fiscal year and $100,000 the next.
Second, we consider the spousal exemption for income distribution to be appropriate. Most provinces recognize spouses as equal financial partners since they share the risks and benefits of running a small business. The CMA and other members of the small business community believe that the tax system must be brought into line with this reality.
Third, we owe it to Canadians to create an environment that is more attractive to small business owners, including doctors’ practices. Under the proposed approach, it will be difficult for Canada to attract, recruit and even retain highly qualified medical professionals.
Finally, we want to be clear. The changes announced last week are not enough to allay the concerns raised by the CMA and the members of the Coalition for Small Business Tax Fairness. These changes add complexity that does not serve any commercial purpose. We encourage the government to keep listening. We will continue the dialogue and keep coordinating our efforts to ensure that these proposals are fair in the true sense of the word, which means that we will not abandon any sector or any Canadian. We hope to work with senators and with the House of Commons Finance Committee to develop tax policies that are fair for doctors, for other small business owners, and for all Canadians. Canada’s federal tax system, which is supported by the governments that set doctors’ fees, has allowed doctors to manage their professional lives in a way that contributes to the economy and the country’s well-being. Corporations are legitimate businesses that facilitate tax and administrative compliance. CMA members feel strongly about tax fairness. We think it is possible. The CMA and its members continue to share their views with their elected representatives, senators, and senior departmental officials. It is our fervent hope that these tax measures will be further clarified.
Thank you. I will be pleased to answer your questions.
The Chair: Thank you, Dr. Marcoux.
Dr. Kulvinder Gill, President, Concerned Ontario Doctors: Good evening. I am a front-line physician practising in Brampton and in Milton, Ontario; a medical educator; a small business owner; and the co-founder and president of Concerned Ontario Doctors. I thank you for the opportunity to speak on behalf of Concerned Ontario Doctors this evening.
In 2000, Ontario granted physicians the ability to incorporate in lieu of fee increases. The government had even encouraged doctors to use incorporation as a vehicle to save for their retirement. Now, more than 70 per cent of Ontario’s doctors are incorporated.
Although physicians bill the government for the patient services they provide, physicians are self-employed and have no pensions or benefits. Physicians cover all of their own overhead expenses, which average 30 to 60 per cent of their fees, funding health care infrastructure, and they must generally service an average student debt of $250,000 accumulated from 10 to 16 years of required university training.
Physicians are unique small business owners in that they are not able to pass their increasing overhead expenses on to patients, as their fees are fixed by the government. As a result, cuts to doctors are a direct cut to patient care.
Faced with the largest debt of any sub-sovereign borrower in the world, the Ontario Liberal government has resorted to rationing patient care by unilaterally cutting more than $3.5 billion from the patient services that Ontario’s doctors provide since 2015. Add to this multiple provincial health care legislation over the past year, hurting patients and stripping physicians of their autonomy and human rights, and you have the making of a health care system in crisis.
In recent years, governments have attacked and vilified doctors. Sixty-three per cent of Ontario’s doctors report burnout, which can quickly lead to compassion fatigue, anxiety, substance abuse, depression and suicide. The suicide rate amongst doctors is already more than twice that of the general population. An astounding 81 per cent of doctors reported feeling attacked and vilified by the Ontario government, and 70 per cent by the Canadian government.
There have now been three independent surveys of Canada’s physicians about these proposed tax changes — in Ontario, New Brunswick and Nova Scotia — and, sadly, the results are consistent. The vast majority, upwards of 85 per cent of these Canadian doctors, report that the proposed tax changes will force them to change how they practise medicine. In Ontario, 75 per cent plan to reduce their working hours; 55 per cent plan to reduce patient services; and 39 per cent plan to lay off staff. Since these tax proposals were announced in the summer, a quarter of Ontario doctors report having already cancelled plans to expand. The end results will be frightening: more patients suffering and dying on wait-lists.
If these tax changes are implemented, 21 per cent of Ontario doctors plan to leave Canada; 26 per cent plan to retire early; and a shocking 11 per cent plan to leave medicine entirely. An alarming 35 per cent of medical students and trainees plan to leave Canada. If doctors follow through on these plans, it will likely exacerbate the already high burnout rate amongst the 88,000 Canadian physicians, which is over 50 per cent.
The recent changes announced by Minister Morneau over the past week do not alleviate physicians’ concerns.
In the name of fairness, physicians are being targeted and treated unfairly. As a young, female, visible minority physician, I represent the changing face of medicine in Canada. Since 1970, the number of practising female physicians has grown dramatically, from 7 to 41 per cent. Now approximately 60 per cent of all medical students are women.
These tax changes disproportionately hurt female physicians, who must use their corporations to fund their ongoing clinic overhead expenses while at home taking care of their newborns. It creates roadblocks for women wanting to pursue medicine and entrepreneurship. A full analysis looking at the gender implications of any proposed tax changes is critical.
The parents of many physicians had struggled to join the middle class and many had withdrawn their own RRSPs to fund their children’s medical school education. The changes to income splitting will now leave the senior parents of many physicians without a pension. Similarly, many physicians will no longer be able to help pay for their spouse’s retirement and, without any RESP contributions, many will no longer be able to fund their children’s university education. This is unfair to small business owners, as public employees are still able to income split their pensions with their spouses.
The limit of $50,000 per year set on passive investments within the corporation will place immense restrictions on the ability of physicians to utilize their corporations as a means to save for a rainy day fund, future investments into their clinics, mat leave and their future retirement. How existing corporations will be grandfathered is unknown, and this will create another administrative burden. The annual limit of $50,000 will be most burdensome on the physicians early in their careers, many of whom are not able to start saving for their retirement until their late thirties or early forties. The annual limit is an unfair burden on small business owners, as no such limits or increased tax rates exist for the public sector pension plans, which average at $3 million in their assets.
The strains on Canada’s health care system today are far greater than those that existed prior to the mass exodus of physicians during the 1990s “brain drain” to the United States. We are entering unchartered territory with our senior population projected to grow by over 68 per cent in the next 20 years. Canada’s health care system already ranks third last amongst the wealthiest countries in the world for accessibility to care; has more than 5 million patients without a family doctor; idle operating rooms; and patients waiting upwards of three years for specialist care. Add in a likely mass exodus of doctors and you have a recipe for the collapse of our health care system.
Concerned Ontario Doctors’ Canada-wide petition to stop these unfair tax changes has garnered 54,561 signatures and continues to grow. The government’s proposed tax changes for small business owners will have a detrimental impact on Canada’s health care. A full commission is essential to truly understand the far-reaching implications of any proposed tax policies. Canada’s patients deserve better.
Thank you for taking the time needed to study the far-reaching implications. I would be happy to answer any questions.
Dr. Rita McCracken, Family Physician and Health Care Advocate, as an individual: Thank you for this opportunity. I’m a family doctor in Vancouver, British Columbia. I have owned and operated three small businesses, including my current medical practice. I’m here to speak to the content of a letter that has been signed by more than 490 doctors and medical students across Canada.
The signatories of this letter are in favour of the proposed changes to the tax policies regarding Canadian-controlled private corporations. We support these changes because of a shared belief that people making more money should pay more taxes as a step towards reducing income inequality in Canada.
However, our support is not unequivocal. This group also calls for a more comprehensive approach to tax reform, including addressing the special rules for tax on stock options available to some of the highest-paid Canadians.
British Columbia is a beautiful place to live and, after having lived in Ontario, P.E.I., Alberta, and Quebec, I am delighted to make it my home and raise my family here. However, one in five children in British Columbia live in poverty, and this ratio has not changed for over 20 years. I regularly see patients in my fee-for-service clinic who cannot afford to pay for the necessary non-pharmacological treatment, such as counselling for mental health. Last week, I saw a frail elder who was barely hanging on in her home. Her rent is increasing and it leaves her with tough choices about what food she can afford to buy. The opiate crisis is raging in my city, killing unwell, poor people.
In contrast, the vast majority of physicians remain in the top 1 to 5 per cent of income earners in Canada. The September 2017CIHI report showed an average Canadian physician makes $339,000 as a gross income, which is a 2.5 per cent increase from 2015. Even if a doctor has a substantial overhead payment — for example, 30 to 40 per cent — they remain very well above the 2015 Canadian median income of $34,000.
The signatories of this letter recognize that adequate tax revenues are needed to pay for important social programs such as affordable housing, food security, legal aid, substance use treatment and the broader health care system itself. These programs directly affect the health of our patients and we need tax dollars to pay for them. As high earners, we believe we have an obligation to contribute to their sustainability through an adequate tax base.
Physicians are in a unique situation as being publicly funded but mostly self-employed. Unlike many of our other small business colleagues, we have provincially negotiated rates and a single payer from whom we can reliably expect to receive payment.
That being said, we believe there are some legitimate concerns regarding physician work structure, such as lack of extended health benefits, vacation time and adequate parental leave. Our training periods are long and student debt has skyrocketed over the past two decades. We enter the workforce late and with minimal business training, and rates of burn out and suicide are high, as mentioned by my colleague Dr. Gill. However, maintaining these tax rules will not address these issues, and we believe our colleges and professional associations must lobby for direct, effective and cost-conscious solutions.
Even for doctors, there is inherent unfairness with the current tax benefits. Of the 117,000 people who are currently using income splitting in Canada, only one in 73 — or less than 2 per cent of them — are women, whereas 41 per cent of Canadian doctors in 2016 were women.
In British Columbia, almost all doctors must work as business owners, despite a widespread interest in having more options such as salaried roles in team-based clinics. Only 60 per cent of doctors in Canada are incorporated. Many doctors are single or have children who are the wrong ages or have crippling debt, all situations which prohibit use of some or all of the current CCPC tax benefits. While 40 per cent of unincorporated doctors is a minority, it’s a large portion of the profession who may have important contributions to this conversation and who have not been widely heard in the media, nor in communications from our professional associations. I will mention that the signatories of our letter include both incorporated and non-incorporated physicians.
While we have characterized the existing tax policies as unfair, we do not see them as illegal or sneaky. These are legal mechanisms, which some of our colleagues currently use to reduce the taxes they pay and which are strongly supported by our professional associations and the CMA’s own MD Financial. To reiterate, the signatories of this letter endorse the originally proposed changes but call for a transition plan that would not penalize those colleagues close to retirement who have used these legitimate measures to save. The recently announced modifications to the original proposal may accommodate this.
And importantly, we identified the need to re-examine the reliance of doctors as business owners in our modern Canadian world, and we emphasize our desire for a more comprehensive review of tax policy, with a view to equity for every Canadian. Thank you.
The Chair: Thank you, doctor.
Senator Marshall: Thank you very much for your presentations and for the documents you provided. They were very informative.
Several of you have mentioned that there has been no impact assessment. That’s true. We haven’t seen anything here on the Finance Committee. Each of you outline repercussions if these tax proposals go through, but not everybody is convinced that the repercussions are going to materialize, because in the past number of years, changes have been made that doctors weren’t supportive of and they have been saying, “Well, people are going to move south, and people will work fewer hours.”
I think there is a perception out there that the changes can go through and the physicians are going to make it fit, and the government is going to raise its additional revenues. And all of those repercussions, the physicians are going to look after them, they will make it fit and everything will be okay.
Has there been some event, say within the last 10 or 15 years, that has happened that the physicians haven’t supported, but there has been a material change you can actually see? Did something happen? I know back in 2000, physicians were given the right to incorporate. At that point and time, there must have been some disagreement with the provincial government. Was there a mass exodus of physicians to the United States or to another country?
Is there something you can offer up as proof or evidence that there will be repercussions — that it won’t just fit into the overall health care system?
Dr. Whatley: Actually, I think there are four or five questions in that one question, but you asked for data so, we’ll try to focus on data. After a decade of the so-called social contract years in Ontario, the decade of the 1990s — yes, and other provinces, I imagine — we had 1.2 million patients who could not find a family doctor. Perhaps many of you around the table remember people in your communities saying, “Do you know a doc? Is anyone accepting patients?”So the impacts that happen first are on the types of care doctors are able to provide, how doctors run their offices and then finally the career plans.
You could summarize it in one sentence: If you cut doctors, cut their fees or raise their taxes, it will have a direct impact on patient care. It has to. It’s a mathematical equation. I’ll give you a concrete example. If I cannot afford to replace my aging EKG machine in my office, then you can’t get an EKG from me in my rural clinic, which means now you have to go to a hospital, so the hospital has to pay for it and hire their own staff. There is nothing more efficient than a doctor’s small office. That’s an example of what happens in the office. Patients will have less access to tests in their own community, they will have fewer staff there to support them and they will probably be in clinics that really haven’t been renovated for a long, long time.
The second thing that happens is doctors make choices about where they practise. When I graduated in 2000, I knew for sure that there was no way I was starting an office. I worked as an emergency doc for a good 17 years. My colleagues did the same as hospitalists, coroners, emergency physicians — anything we could do to avoid opening up a small business. We wanted to be in the hospital where we didn’t have to deal with the uncertainties of overhead. What does that mean for patients? There are fewer clinics for them to see doctors in.
The final thing that we hear about, the thing the media loves to talk about, is the brain drain. Everybody is going to leave. Even at the peak of the brain drain in the 1990s, we were only losing several hundred physicians per year. One year we got as high as 500 or 600 physicians. We can provide the data for you. But overall, people who live in Ontario and in Canada love Canada. We love Ontario. We have roots. We have families. So that’s the last resort that you see. What you see first is that people who are able to retire do so. People who are able to downsize do so. We have many clinics that have been forced to close because they can’t maintain their overheads. So those docs change the work they are doing, change their career plans, and that ultimately impacts patients.
This discussion needs to have patients at the centre. If there was a promise that every dollar you took from doctors was going to go directly to patient care, I bet you would have some different opinions around this table. I have never seen that kind of action. Furthermore, we would then have to ask, “Is it really right to improve health care on the backs of physicians only?”
So I think you’re asking the right questions about patients, and we have lived through this in the 1990s. We are only just starting to get out of that. Please don’t bring us back there.
Senator Marshall: But the perception out there is that we queue up and will eventually be seen by a physician and that the emergencies do rise to the top and are dealt with. Even though you might get the stats — you gave the stats with regard to our health care system compared to other countries — the perception is that we will eventually get looked at by a physician. The emergencies will be looked at, everybody will be happy and the government will get its extra revenues.
Dr. Whatley: We have two-year wait lists for hip replacements in my area. Is that properly insured? We have young ladies dying on wait lists with curable problems. We have people dying, curled up in a ball, on the floor of the Winnipeg emergency room saying, “Oh, they are just overreacting because of their headache.” It’s a bleed in their brain.I could give you story after story after story.
We don’t have the resilience in our system to be asked to do more with less. We have been cut and cut and cut. In Ontario, we’re down over 6 per cent just on fees. If you look at net income, it’s actually closer to 30 per cent. Eventually, there is nothing left in the bread basket.
We don’t want to go so far that we’re scrambling and trying to recruit people from overseas, or I don’t know what we’d do. But you can’t cut something so far without having an impact on patients.
Dr. Gill: I practise in two communities, Brampton and Milton. The sad reality is that I became involved in advocacy for our patients two to three years ago. That was when a patient of mine shared how her terminally ill husband had died in the local ER because that was the only place for him to receive palliative care. My mother was a palliative care patient, following a very long and courageous battle with breast cancer. She was fortunate to actually receive palliative care. But our health care system is failing our most vulnerable. Patients are not receiving the care they need. We have access to a wait list, not access to essential care. That’s not a health care system we should be striving for.
Anytime we talk about the quality of our health care system, for some reason we compare it to the States, which is just as terrible as ours. We need to look at other places in the world that are doing it right, and there are many of them. We need to start innovating. There will be no means for innovation if we are just struggling to just keep the system together with Band aids.
Morale is low. Doctors have been attacked and vilified. When you have percentages such as 11 per cent of doctors now thinking about leaving medicine entirely — think about that. After devoting 15 or 16 years of their life training, taking on a quarter million in debt, doing 100 hours of call, the sacrifices with their family, now they are saying they’ve had enough. They want to put their own mental well-being and their families’ ahead, and they feel they can’t meet their patient’s needs, even in the system, it’s so broken.
In our survey, 45 per cent of doctors indicated that they are struggling to meet the needs of their patients, and 50 per cent indicated that their clinic practices were driven by government-driven policies as opposed to evidence-based clinical medicine. We really need to realize that these numbers are real and that these tax changes cannot be taken in simple isolation because there has been so much happening in the health care forefront over the past two years.
Senator Marshall: These statistics you just mentioned — where do they come from? Was there a survey conducted?
Dr. Gill: We did a survey of Ontario’s doctors and trainees at the beginning of September.
The Chair: If I can intervene. Do other doctors want to respond? Could you provide the clerk with that information?
Dr. Gill: Yes, it’s in the package.
The Chair: Thank you, Dr. Gill.
Dr. Marcoux: I would like to add a few comments to these very eloquent presentations.
I would point out that Canada’s population is aging overall, and that the incidence of chronic disease is increasing. You will agree with me that the emergency ward is not the place to treat elderly patients with chronic diseases. This prevents our profession, through business corporations, to continue looking after patients outside hospitals.
I will present the argument to the House of Commons tomorrow that elderly patients need home care more and more. In order for doctors to provide that home care, we need the type of business we have just talked about.
The population aged 65 and over now outnumbers those aged 14 and under, and this trend is increasing. People with chronic diseases should not be treated in emergency wards. Rather, adjustments must be made at home to stabilize them.
The Chair: Dr. McCracken, do you have a comment?
Dr. McCracken: Yes, I would like to comment about the surveys that have been reported regarding physicians’ intent to leave medicine or to take job action. I have had a chance to take a look at those surveys and, as a researcher, I have some concern about how the questions were constructed. I think it would be important, in taking a look at those surveys, if we were to take an opportunity to have the questions and their results validated.
The Chair: Thank you.
Senator Forest: Thank you so much for your very informative testimony. I have two quick questions. The first is for Dr. Dubé and Dr. Levin. You talked about the $50,000 exemption on passive investment income and said it is insufficient, given the very nature of your activities. In your opinion, what would be a suitable limit for taxation?
Dr. Dubé: I know that $50,000 is not enough, but I have not evaluated the potential amount for my own practice. If I had to do that, I would definitely have to contact my consultants, my experts, and my accountant to get the right figures. Having talked to accountants, I know that $50,000 is not enough. Unfortunately, I do not have a figure in mind.
Senator Forest: Would it be possible to send us an approximate amount, based on the particular characteristics of your practice? We have to produce a report, so some guidelines could be helpful to us.
Dr. Dubé: Yes.
Dr. Levin: I also do not have a specific number. I think the research that needs to be done could be done quickly and give you the number you’re looking for as a ballpark. It has to be taken in the whole context of a lifetime of taxation and expense and not in one isolated piece compared in some abstract fashion. We have to be very careful we don’t focus on a magic number, because there isn’t one. It’s within the big picture.
Senator Forest: I am not looking for a precise diagnosis, but rather a general review in order to identify a reasonable amount for an exemption, based on your practice. You said that, in view of these changes to the tax system, there could be a major risk of our specialists leaving and going to the United States, in particular. What major tax changes would incite your colleagues to move their practice to the United States?
Dr. Whatley: Great question. I’m glad you identified the fact that any kind of change in country is not an easy decision to make for people who are already here. What we’re faced with is finding a way to make, in my case, Ontario, but also Canada as attractive as possible to our top talent. When they are making a decision between a great offer at Johns Hopkins University or the University of Toronto, it gets down to things like the cost of living, the marginal tax rates and whether one’s spouse can be employed.
That is especially true when you start looking at recruiting people to smaller towns in Ontario, including rural situations. Very often, a spouse can’t get a job so they give up a career. If, all things being equal, they are better off just being in a big city because the spouse can get a career versus being in a small town with no income splitting, it’s much more difficult for me to get people to go to those areas. So there are two issues: distribution within a province, but then also distribution between countries.
But you’re absolutely right, and to a previous senator’s question, you’re really pushing at the margins because people who are already here will put up with a lot, but that’s not good enough when we are trying to attract the top talent to make the decision to plug into Canada and live here for 30 or 40 years to provide some of the super-specialized care that we need. I’m not sure if that answers you.
Senator Forest: Yes.
Dr. Marcoux: Canadian doctors want to be autonomous and be able to create their own practices. That is also an important motivating factor. They do not like being subject to endless waiting lists. They want to be able to innovate, create and invest in their practice in order to offer their patients better services. This has been confirmed several times.
Senator Eaton: Canada does have too much geography in some cases.
I would like to pursue what you’re talking about. Yesterday, we heard from farmers and people representing agricultural associations. There was an interesting point raised by Ray Orb, who is the President of the Saskatchewan Association of Rural Municipalities. He said,“Most doctors in Canada are also small business owners who create local jobs, purchase equipment and supplies, rent or buy buildings and pay their taxes.”He also went on to say, “We have a shortage of rural doctors, not only in Saskatchewan but across the country. If we make it tougher for them to operate, they are simply going to leave Canada.”
I have heard and read in several places the hue and cry from isolated doctors or doctors in local communities, especially in our North. Have you anything to add to what he said?
Dr. Whatley: I am glad you asked that question. I’m a rural physician myself. I work in a tiny village of 2,500 people. We have a tiny pharmacy in town. If I go out of business, my pharmacy is struggling. If I can’t provide tests in my clinic, then for my elderly patients there is actually a bus they can take. It’s about a two-and-a-half-hour bus ride for them to go into the nearest town to get their ECG or to get their blood drawn.
The reason I give you those examples is that it’s the smaller clinics, especially in the small rural towns, that are at the margins of care. This is what I explained when I had the opportunity to speak with Minister Morneau. He kept saying, “Oh, anyone earning less than $150,000 won’t be impacted at all; it won’t make a difference.” Actually, many of the physicians in Ontario are in that group or on the lower end of the spectrum, and their margins are so small that any tiny change forces them to think, “Well, is it really worth me continuing to practise in this rural community? Or should I just change and set up shop with a large group in a bigger city or a bigger town nearby?” That’s not good for our patients.
Senator Eaton: I would love you to elaborate on this. I sit on a tertiary care hospital foundation in Toronto. One of the things that came to my attention quite awhile ago is that the government health care will pay for bricks and mortar but it doesn’t pay for equipment in a hospital. We have to raise money for research and equipment. You’re talking about your EKG. If it’s old and getting worn down, you have to pay for it. The government doesn’t pay for it.
Dr. Whatley: You have raised a great question. I’ve sat on the foundation board for a large hospital. You’re mixing two different issues of funding. Capital equipment costs in the hospital sector can be raised by hospital foundations, charitable donations and that sort of thing.
Senator Eaton: By the health sector. I think most of the public think oh, the government buys it.
Dr. Whatley: Absolutely. So the cost that the hospital ends up bearing, if I don’t provide the ECG, is the staffing cost, facilities and that sort of thing. That actually is the biggest budget line item in most large hospitals. But I’m glad you brought that up.
Dr. Marcoux: In terms of access to public services, it is important that they be available nearby. This will be raised increasingly because seniors do not want to travel to the ends of the earth to receive services, and they like to be recognized. The infrastructures that doctors are creating in rural regions are losing ground at this time. Having doctors in rural areas is very important. Having medical services nearby puts medicine on a human scale and gives patients more services, confidence and satisfaction. This is also very important in hospitals. Yet hospitals would certainly not set up a clinic in a rural area, as Dr. Whatley and I have done in our practice; they would not bring in primary, but important, investigative tools; nor would they assess patients.
Dr. Gill: Most of the health care infrastructure you see outside of hospitals is entirely funded by doctors. The staffing funding is also from doctors.
We can look across the pond in terms of England and what is happening in their health care system. Ours is lagging a couple of years behind. They have also had dramatic cuts to front-line care and doctors being vilified. A study came out of England the past year where doctors are leaving their public health care system at a rate of 400 per month. They have had nearly 6,000 family doctors already leave their public health care system.
Senator Eaton: But they have a two-tier system, don’t they?
Dr. Gill: Exactly.
The other important thing to realize is that doctors don’t have to leave the country or province for patient care to be impacted. In the survey, as also happened in the 1990s, physicians simply stopped doing OHIP-based services. They started doing more work outside of OHIP so they can actually bill what the service costs them in terms of providing the actual service. About 70 per cent of doctors in the survey indicated that they were planning to decrease their OHIP services, which will dramatically impact patient care directly.
I think it would also be a folly to try to negate the validity of these surveys. These are surveys, not studies, but they are opinions of doctors. Three surveys in three different provinces done by three different groups are rendering similar responses. I think it would be a folly to actually ignore that.
I would also like to comment that the letter indicated it is signed by approximately 400 physicians. When you look at the signatory list, many are not physicians but trainees. They are medical students or medical residents. When you look at the number of people that have signed that petition, it represents less than 0.1 per cent of the entire medical profession, many of whom are salaried or in non-clinical work and do not own small businesses.
The Chair: To complete this round, Dr. McCracken, please.
Dr. McCracken: Thank you for the opportunity to respond.
I agree with many things that my medical colleagues have commented on. The area where I have a strongly held different opinion is that I do not believe that hanging on to the old CCPC tax policies will fix the problems we are describing. These issues need direct solutions.
The vast majority of new graduates in the last 10 years are not interested in running a physician business. They are interested in working to their scope as physicians. We have not had the opportunity to have a transition within our medical community where we would be able to evolve to a place where doctors can be doctors and not both business owners and physicians at the same time.
Senator Pratte: When we make comparisons, for instance, when we talk about SPCCs run by medical doctors and we talk about them being small businesses like other small businesses, I understand there are many similarities, but in my view there are also important differences as to risk, for instance. Other businesses can go out of business. They don’t have a guaranteed source of revenue, as medical doctors do. That is an important difference. I know there is a risk in cost of equipment and so on, but if you are a medical doctor, unless you are a terribly bad manager, there is no risk. The revenue is guaranteed and you have a guaranteed clientele. You have more clients than you can serve. That seems to be an important difference, especially when you talk about income sprinkling. One reason why there is logic for income splitting is that the spouse shares the risk. I am not sure if the same logic applies to a medical doctor. That is one point I would make, and I would like to have your reaction to this. I am wondering about it.
The other thing is comparing an SPCC with high revenue, which is certainly the case of a professional SPCC run by a medical doctor and other Canadians. We usually do this comparison with unionized Canadians working for a government with generous benefits and union-provided, paid in part by the government, and so on. But this is a small minority of Canadians. Most Canadians do not belong to a union and, therefore, do not have generous benefits or pensions that are in large part paid by their employer. Therefore, they do not belong to this privileged class of Canadians. Those are the people who are the middle class or lower than the middle class and for whom fairness is important. We should compare those people and the medical doctors and others who are part of the 3 per cent that is the goal of that fiscal reform. I am not saying I share the way this reform is planned, but those are the people we should compare medical doctors to. I would like your comments on these points.
Dr. Marcoux: The points you raise go to the very heart of what fairness is. You said that small businesses do not face any risks. In fact, every business faces its own risks. Some businesses face the risk of not having enough clients, although that is not a problem for us. I can tell you about the experience of many businesses in rural and even urban settings. When you set up a clinic, there are many risks, such as innovation. Medical practice is changing. We have to monitor risks and modernize. Our equipment is very expensive. When people talk about doctors’ average income, that includes our radiologist friends. It is clear though that CAT, MRI and ultrasound equipment costs millions of dollars. Doctors receive those amounts as gross salary, but they give it back to society. They also have the risk of managing employees.
What do doctors do at the end of their careers? Is there a guarantee that someone will take over this massive investment? I am referring to rural clinics in particular. I wish Dr. Whatley were here to tell me how much he expects to make from his clinic when he retires. It might be a loss. It is often a loss in rural communities, but less so in an urban setting. These factors are not supported by public funds and represent a form of risk.
In my opinion, these risks are not the same in all settings. Farmers face risks related to the weather and the elements, while others do not have those risks. Everyone faces certain risks. For small medical corporations, there are risks related to the staff and colleagues who join the team. Demand is high and there is a shortage of doctors. In general medical practice, if there are three doctors, we would need five, so if one were to leave that would create stress. We talked earlier about mental health. There is the stress of feeling squeezed and not being able to provide the services that the public is clamouring for.
Small medical corporations also need reserve funds. We need to innovate and update equipment. There are many things to manage in a clinic, no matter what kind of clinic. The most striking example is a radiology clinic. Dentists also have a lot of costs, although I am not as familiar with that field. The same equipment cannot be kept for 20 years. Our professions are evolving. We live in an era of change and modernization; we have to keep up to date, and that poses a risk. We see this with young doctors who are going into practice. They are so aware of the risk that they are hesitant to become small business owners.
This worries me. Who will take the place of doctors in rural communities if young doctors, as Dr. McCracken said, do not want to be business owners? Will they set up practice with the help of hospitals, which provide the necessary infrastructure? I do not think we have reached that point. They are having trouble keeping up with the pace, even for those in their own company.
We are real business owners. We have our share of risk to manage, and that is why we are asking society — to which we return a good part of that money by employing people, by giving people work and by purchasing equipment — to consider us as independent business owners.
If we want the Canadian economy to continue to grow, we must remember that small businesses are the engine of the Canadian economy. There are a few large businesses and they are impressive, but they aren’t the ones that employ the most people. It is the small businesses that innovate and work daily serving society.
Dr. Dubé: I’d like to talk about Canadian radiologists. In order to own a radiology clinic, you have to buy a licence; you could compare it to the licences taxi drivers have to buy. So we are the taxi drivers of medicine in Canada. We have to buy it from another radiologist, and that is how it goes, from one generation to the next.
I bought two licences on the Outaouais side. There are three licences in the Outaouais, and I own two of them. They have been passed from one owner to the next since the 1970s. There is a cost for them, you have to buy them. I spent a lot of money to acquire them. I took a risk. I even put my house up as collateral to buy those licences. There are risks. It’s the same thing for all my radiologist colleagues who have clinics. I’m the president of the radiology clinics of Quebec, and I wanted to comment, because this is a big risk we have to take.
The other risk we experience as radiologists has to do with the fact that we work as teams. We work with technologists we hire, who are professionals and belong to a professional association. These technologists perform the tests, and we interpret them. They are human, and they can sometimes get sick, or go on maternity or parental leave, and they are hard to recruit. We compete with the hospitals to recruit them. If tomorrow morning my ultrasound technician is sick, I have no one to perform ultrasounds. That is another risk, and it is difficult to find people in these professions. I can tell you that I treat my technologists very well, as I would like them to stay with me. The risks are very real. My sister is also an entrepreneur, but for a funeral service. We talk often, and we share the same risks and concerns.
Dr. Levin: Certainly dentists epitomize small businesses. They graduate after many years of university education, with often $300,000 to $400,000 of debt. They then go into setting up an office, which can easily cost half a million dollars to $750,000 to set up all the equipment and material necessary in order to treat the first patient.When you look at that as a small business, you would say that will take a lot of skill and expertise to manage that financial situation. We have a tax environment that has been created that they graduated into with the expectation that this is going to support their way forward.
If, on the day of your graduation, you suddenly change without a thoughtful evaluation of it, you risk having unintended consequences that will adversely affect this young person setting up their practice. The way in which they plan for their future and the way they can plan for lowering the costs of setting up the practice and the debt reduction are very much small business focused.
What we are asking as the Canadian Dental Association is that this have a thorough, comprehensive look so you can picture the tax consequences of starting from when you open your practice until you retire. What does the whole picture look like? Is fairness then being applied when you look at that big picture? If not, what do you need to do to balance it? No one at the Canadian Dental Association would ever say we are not looking for tax fairness or that we don’t want to pay our fair share. We just want an overall thorough study that has a balance to it that we can effectively evaluate.
Dr. McCracken: I wanted to speak directly to the senator’s point about the kind of risk we are actually talking about. In 2016, Canada had 66,256 bankruptcies, 12 of which were by physicians and eight of which were by dentists. I think we can all agree that the actual risk rate is quite low.
Dr. Gill: Just to comment on that, before adding my own comment: physicians will not go bankrupt; they will simply leave the country.
Taking on a debt of a quarter of a million dollars is an immense risk. A quarter-million-dollar student loan is an immense risk. When physicians first graduate and start their practices, we don’t simply put up a shingle and the patients come. It takes years to build up a practice. There are other loans required to be able to afford the infrastructure to start the practice.
We don’t have guarantees anymore. Ontario’s physicians are now into our fourth year without a contract. In the past two years, the $3.5 billion in cuts have been unilateral, which means that announcements just happened. We would go four months in and a new announcement of new cuts. Every month, when Ontario’s physicians bill the government, they bill the amount, but then there is a new line that appears on our form, every single month, of what the government has clawed back unilaterally. So we don’t know when their next unilateral cut will happen.
Physicians are also not only unemployed but underemployed here in the province — not because there is a lack of need. It is because of rationing of patient care. We have a large number of orthopaedic surgeons here in Ontario that are underemployed. We have a large number of ear, nose, throat specialists and surgeons that are underemployed. They have immense wait-lists for patients but they do not have the time for the operating rooms because the operating rooms are shut down with the lights turned off because the government cannot fund the ORs.
It is important to realize that there is an immense amount of risk not only in actually becoming a physician but in starting a practice, and then this immense amount of uncertainty that comes from the government.
The Chair: Thank you.
Senator Neufeld: Obviously, some of my questions have been asked, but I do have some other ones.
I live in rural B.C. and I have lived there most of my life, in a small community of 3,500 people and in a larger community of 20,000 in northeast B.C. Trying to attract doctors is horrendously hard in those communities.
I also spent time in government in British Columbia. I know what happens at the table when you are talking about budgets and how much money is going into health care and where you get the money to actually fund all the things that Dr. Gill has talked about to provide the service.
When I see something or hear about something where the federal government — and they provide funding, too; I’m not saying they don’t — is starting to move in a way that will hinder the opportunity for us to get doctors into rural B.C., it really bothers me, because they have a target for tax. I can’t explain it any other way. We have talked to the Ministry of Finance people and we will talk to the minister here again in the next little while, but it’s all about looking for money.
The Prime Minister and the minister have both talked about loopholes and we have to make the wealthy pay more and all of those kinds of things, and this will all be fair. Can you first tell me, was there consultation with your groups prior to July when this first hit the street? Did any of you have one consultation with government? If you didn’t, how much consultation have you had since that paperwork was laid out in July? Is it meaningful?
You can also answer my last question. I have problems with loopholes, using terms such as “dead money” and those kinds of things because that’s not true. If we’re looking at saying the wealthy have to pay their share, why are we just picking on one small group? What about people who have trusts? I think you will relate to that. We have a couple of people heading up this looking for money who have some trusts. Why did we not hit those wealthy people? I only assume they’re wealthy; I don’t know anything about trusts. My trust is my paycheque every month. I don’t know about trusts, but there are lots of trusts around. Do you think that if we are to level the playing field, as some people say, and be more representative and compare better, why wouldn’t we hit a whole bunch of others?
I won’t go into it, but why wouldn’t we hit the banks for their realistic share of tax that they should actually pay? One bank — and we have the information — in three quarters would pay as much as they’re going to get out of what they’re doing right now. It’s interesting.
I would enjoy hearing your comments on all of those things, if you would, please.
Dr. Dubé: What you’ve just said is very interesting, and it’s refreshing to see that kind of openness of mind and to leave the beaten path. Yes, doctors feel targeted. We feel targeted from various sources. It would be important, as you said, to look at the whole picture and to see where the money could be found without causing negative impacts for the general population. Because with physicians, that is what is going to happen: it’s the Canadian population that is going to be feeling the cuts, in the final analysis.
To go back to your first question, as to whether we were consulted, our association, the Canadian Association of Radiologists, was not consulted until July. We received invitations, with a two-hour notice, to take part in round tables in the Ottawa region. I was asked to participate but unfortunately I had patients to see, and my patients are my priority. So I did not go. So consultation was minimal or non-existent.
Dr. Levin: Other than hearing in the media that something was coming and then once the government released its suggested report, there was no consultation. We had a 75-day consultation, as did everyone else in Canada. We have submitted our report. That has been the extent of it — nowhere near sufficient time to digest and reflect on something of such national importance and potential problems of unintended consequences.
I’m very happy to hear that you have raised the question of loopholes and how that has been framed by the government. It’s absolutely incorrect and somewhat insulting to consider that if you were to take advantage of a system that was set up for all Canadians to use and if you did follow the rules and do what the government has suggested, you would now be somehow framed as suspicious or taking advantage of loopholes. We very much object to that kind of characterization.
I appreciate your outlook and support what you have said.
Dr. Marcoux: Yes, the Canadian Medical Association was consulted by Minister Morneau at the end of August. We had very few things to put on the table, few objective facts. We met with Mr. Morneau for an hour. What we said to him was that we want more time to do an in-depth analysis of the probable adverse consequences of the amendments to the act. We are still asking that this taxation legislation, which has been an existence for 45 years, be renewed and reviewed. We agree, if these changes can make things fairer, but some time is needed. There are so many unintended perverse consequences that can arise and that we will regret, but then it will be very difficult to put the train back on the tracks because trust will have been broken. If, for instance, in a clinic certain doctors retire early and others leave their positions, this will discourage younger people from taking over these clinics and managing them. How will we rebuild trust? What can we offer them so that they think it is interesting to offer these services to the population?
Dr. Gill: Thank you so much, senator, for your comments. Sadly, front-line physicians here in Ontario were not consulted prior to the submissions coming forward. Following the proposals coming forward, we had contacted Minister Morneau’s office numerous times and attended one of his town halls to be able to speak with him as well. Initially, his office had shown interest but, upon follow-up, they never actually committed to even a phone meeting. We had hoped to speak to him not only on behalf of front-line physicians but at that time also the 50,000 Canadians who had signed our petition.
I do agree that there are many loopholes within our current tax system that do need attention. I think that is why a full commission needs to be undertaken. The CEO loophole that you mentioned is something this current government had campaigned on. That was a broken campaign promise that is now costing taxpayers $840 million this year alone, and the estimates indicate these tax changes will bring forth approximately $250 million. This is something that is directly impacting millions of patients here in Canada.
One thing that is important to realize is that when one’s physicians are impacted, patients are impacted not only through the wait times and in terms of access to care but we employ so many Canadians in terms of staffing. Once those staff layoffs happen, those families will be impacted. Once there are greater wait times for patient care, those are patients who are no longer productive members of society because they’re waiting in pain at home. That is then further tax revenue being missed by this government. There are far-reaching implications that need to be studied further, which is why a full commission is actually needed.
Dr. McCracken: I’m addressing the committee as an individual, and I was not consulted by Minister Morneau.
However, I would like to say in direct response to the senator that I have great sympathy for the recruitment issues associated with rural communities in British Columbia and around Canada. I’m engaged in some research work to try to understand this and create solutions where we could measure improvement.
I will point out that British Columbia has had the right of physicians to incorporate since the 1970s. That did not fix the problem of rural recruitment, and I would suggest that it may actually be contributing as part of the problem.
Senator Neufeld: I’ll make one comment. I can tell you that anything that the federal government is doing that is going to reduce a service that we have today for rural doctors where I live that I know about — but I know the rest of rural B.C. is no different than I am, where, in the morning, at 6:30, you see the lineup lining up for the one walk-in clinic. They will take so many people, and the rest go back home until tomorrow. Maybe you’ll be able to come to the lineup earlier tomorrow.
I’m not saying that incorporation fixes all of that. But what I am saying is that it has been in place, and what we have heard is that doctors will change their practices somehow. They may not leave the country, but they’re going to change. They’re going to retire or do less, whatever. That affects my family. That affects all of the people that I know where I live. When the federal government starts doing something like that to find $400 or $500 million, when I think of a budget of $250 billion, if you can’t find that kind of money in there in waste somehow, something is wrong. I don’t know why we attacked that thing that we already have. We could actually start losing doctors because of actually just saying we’re going to tax the wealthy, and I rest my case, sir.
The Chair: I almost thought, Senator Neufeld, that you had a question.
Senator Neufeld: I was close, but I knew you wouldn’t let me.
Senator Andreychuk: In light of the late hour, I am going to just make a comment and then ask for your response. It seems to me that what I don’t understand is the target of the professionals, obviously. Certain professions are making more money than other professions or other people, so it seemed like an easy target for someone in bureaucracy to say, “There is excess there that we can claim.”
What troubles me is that the government didn’t see the unintended consequences. To me, it is the unintended consequences not just to individual doctors in practices but to the health care system. Doctors are pivotal to the health care system, as nurses are, as caregivers are, palliative care. We have a debate in Canada, and we have a conversation about an aging population and the needs.
I don’t quite understand. Did you raise with them that the unintended consequences may be that some doctors will leave or that it’s going to hurt you, but that it’s going to have the unintended consequence of an already fragile health system being even more so? Why were you not consulted, do you think? Or why is it that they didn’t look at you as advocates of change in the medical system, because we all think it has to change, instead of seeing you as a target for $250 million, when, in fact, I think we spend, in my province, a lot more money per year trying to recruit doctors, build hospitals, keep hospitals in rural areas going when the doctor has left? It’s impossible. So there isn’t that sort of blending.
It seemed to have been targeted as income generating as opposed to the context of where doctors fit in our society. I don’t know if anyone can help me with that, but that’s the one that is troubling me and particularly with comments about rural communities. I come from Saskatchewan. It’s all rural, we say.
Dr. Marcoux: You are quite correct. You are almost asking us to diagnose this government’s intentions, and that is not something I want to do.
Senator Andreychuk: Did you not ask them?
Dr. Marcoux: You can ask them, but I know that these changes will certainly have a negative impact on Canadians. Some much smaller changes were made in the past regarding admissions into medicine. A federal government notice indicated that there should be fewer of them, and the provinces followed that advice. We lost 800 doctors, which is equivalent to four classes of physicians in two years. People wanted to go elsewhere and did not want to be subjected to these rules. Medical practitioners seek to be independent, rightly or wrongly. We want to have this independence, so as to be able to offer the best service to our patients, and that is our daily life, even for incorporated doctors. We are all doctors. Before I became president, I asked every young doctor I met why he or she still wanted to become a doctor, despite all these complications. Their answer was that they wanted to help people. No one ever answered that they wanted to make money. They know that the profession is well compensated, but their first answer was that they wanted to help people, and I knew that was the truth. Helping people is the soul and DNA of doctors. We are convinced of that. We have over 86,000 members, and there are more than 100,000 in Canada.
One day when I was at the restaurant, I started talking to the person next to me. He was wearing an Order of Canada insignia. He was a physician. I asked him why he had chosen this profession, and he gave me the same answer. I did so for the same reasons, my colleague as well, and the other one also. We have to give doctors the freedom to provide the best care and to surpass themselves, with all that that can mean. Physicians do surpass themselves, and in doing so they get frustrated, and this has an impact on their mental health, which concerns us at this time. Is constraining them further and placing obstacles in their path a solution? I think it will make things worse, and it worries me. The mental health of these people who dedicate themselves daily to our care concerns me. Think about your doctor, and you will see what I mean.
Dr. Dubé: I’m going to answer your question.
When I question the people around me, they tell me they like their family physician. That person is precious to them. When we talk about incorporated physicians, they don’t have a good reputation. The media constantly talk about physicians’ salaries, doctors who don’t work enough, and the image presented is always negative. We are easy targets for the federal and provincial governments because the general population does not support us as a group. I think that is part of the reason why we are targeted.
Dr. Levin: To your question about the intention behind this, I think that, as you have heard, we go into our professions because we love the work we do. We want to help people. But I also have to think that the public servants go into their careers, as you have done and others have done, really for exactly the same reasons. You want what is best for Canadians. I think the government, in looking at how to raise funds, had some idea, didn’t do proper consultations, brought it out too quickly, and we have seen the unintended consequences. I think that, rightly so, they have moved back on that. Hopefully, they will re-examine the whole issue properly. I think that this is unintended consequences affecting the professions and it needs a full examination.
Dr. Gill: Thank you for your important question. Front-line physicians, front-line health care providers, nurses, all providers want to be part of the solution, and we want to be able to collaborate with the governments to come up with solutions to fix what is actually ailing our health care system.On the front lines, we see how our system is failing patients on a daily basis. We know that with such an aging and growing population, this is simply going to get worse because our current health care model is simply not sustainable.
What we have seen here in Ontario over the past four years is a provincial government that does not listen and hasn’t actually collaborated with the front-line doctors, and many of the advisers, we all know, have now moved into the federal office. I wish that there was greater collaboration because we do want to be part of the solution.
Sadly, physicians have been dehumanized. We are people. We face stressors. We face depression. With a suicide rate over twice that of the general population, that’s something that really needs to be addressed. There are huge barriers and there is stigma, but college reporting also creates barriers in terms of doctors seeking the care that they need. Governments need to start seeing doctors as humans. Governments need to start seeing doctors as actual collaborators so we can start working to fix these problems.
Senator Oh: Thank you, doctors. You are top on the list that we all can trust and respect.
Women in Canada, and around the world generally, perform the bulk of unpaid work in households and in the paid labour force. The situation continues to be highlighted through our discussion about proposed changes to the tax system in particular because the term “work” continues to be mainly understood in relation to paid activities linked to the market. Do you agree that the federal government needs to do a better job at recognizing the economic and productive activities of spouses who are not actively involved in the day-to-day operation of a private corporation? To me, it appears that despite the commitment to examine the impact of this proposal on men and women, the federal government has overlooked that spouses provide the collective labour required to support the growth and success of small- and medium-sized businesses.
Dr. Marcoux: I think that the revenue-sharing you are referring to among doctors’ partners is a part of the very nature of the profession. This concerns our female colleagues, in particular, because they have very irregular hours in their practice. Babysitters and grandparents will not take care of their children in the middle of the night when they are called, or when they are on call. That is part of life for all physicians.
It’s similar to the risks we were talking about earlier. These are not the same collaborations: they are very important. A physician may practice alone, but if he or she has a family, he can’t sacrifice his family for his profession. They need intense cooperation. All physicians, and particularly women physicians, need it, as do physicians in rural areas, because the spouses who follow physicians to rural areas sacrifice a large part of their life to allow that rural population to receive the services it needs. This touches me deeply, and I think that that is a great sacrifice on their part. Even if they don’t sign a contract or sign any documents, they provide concrete assistance by supporting their spouse who practices his profession. We have on-call hours, irregular hours, calls, emergencies — all of that is very frequent, and it demands the dedicated cooperation of the spouse.
Dr. Dubé: I could give you the example of a physician couple I know very well. The woman stays home; it’s a decision they took as a couple, together. He is an urologist at Queensway Carleton Hospital in Ottawa. They have three children who go to school with mine, and Chloé, as I said, works at home. She does not spend her days watching television programs. She is the taxi, she drives the children to their activities, she helps with their homework, she cares for the house, and when her husband is on call and has to leave to go and do surgery in the night, she takes care of them. It would be hard for her to work outside the home. I think that a couple like that has to be commended, because together they make up the enterprise.
The Chair: Witnesses, thank you for sharing information with us. It has been very informative, educational, and I would even say very important to the order of reference that we have received from the Senate of Canada. Thank you very much.