Incorporation Anger

Bill Morneau, Justin Trudeau, and the federal Liberal government have proposed tax changes to corporations and some physicians are outraged.  In Ontario, the ability to incorporate was granted in 2005, in lieu of fee increases, during negotiations between the Ontario’s Ministry of Health and the OMA (Ontario Medical Association).  It could have been predicted at the time that the Ontario government was giving something away which could be then be taken back at the federal level. Physicians could incorporate to shelter income from high personal tax rates and save for retirement, among other things, and around 70 % of us did (including me).  Justin Trudeau alluded to changing theses rules during his election campaign in 2015 and has now formally signalled that he intends to follow through on that promise.

The unintended consequences of closing these loopholes are completely unknown- “Without data you are just another person with an opinion”- W.E. Deming.  Prior to 12 years ago there were very few incorporated physicians in Ontario.  Cries of “Doctors will work less!” “Doctors will work more!” “Doctors will leave!” “Doctors will burn out!” due to these changes alone are grounded in opinion and not fact.  Each individual physician will have to firstly wait until the legislation is passed, and then carefully review it’s effects on their individual situation with a trusted financial advisor. I think it behooves our medical leadership to be truthful about what is known and what is not about the proposed changes and any downstream effects (or lack of them) on the broader health care system.

The amount of risk taken on by the average physician opening a practice in Ontario (or in Canada for that matter) is usually minimal.  Opening up a restaurant or a boutique- that’s risky.  So let’s not pretend about the amount of risk there is to financial failure of the vast majority of physician practices. To do so is insulting to other small businesses who do in fact take on large financial risks to establish their profit streams.

Physicians do not have benefits, pensions, sick time or disability leave.  Tax shelters and loopholes masquerading as pensions and parental leave payments leave doctors at the mercy of both governments and public opinion.  If there is one thing I have learned being involved in medical politics over the last few years- the general public does not care that doctors pay overhead!  And they shouldn’t have to.  The longer we stick with the model of doctors funding health care infrastructure out of billings, the more we get behind with public opinion every time the profession starts trying to win the public relations battle by arguing that we pay overhead.  The same goes for tax policy- arguing that tax savings are a way for physicians to fund maternity leave, pensions, benefits etc are not invalid, but don’t carry a lot of weight when jobs which include these things are becoming rarer and rarer in the job market for all Canadians, most of whom are paid a small fraction of what physicians earn.

The only thing which IS clear about the proposed changes effects on mat leave is that the way maternity/parental leave is provided to physicians (at least in Ontario) is silly.  Female (or male) physicians forking out office expenses are under a lot more financial pressure during maternity/parental leave that those who are not, and yet both groups receive the same payout from the Ministry of Health.  At the very least, there should be different treatment of doctors who run offices on parental leave versus those who do not.  Maybe physicians deserve parental leave, benefits, and pensions simply because these are things that doctors (and our patients) should have? Funding these things for only a specific group through tax loopholes leaves doctors in a precarious position when taxation policy changes like these come along.

I’m an incorporated physician- and it’s a wildly expensive, complicated, painful enterprise which I would rather not have to deal with.  A large start up cost and then yearly fees to lawyers, accountants and financial advisors. On top of that, investments haven’t done all that great, certainly not as well as much larger pension plans. 30 % of physicians are not incorporated and there are others who are who will be minimally affected by these changes, or in fact have ended up worse off from incorporation.  What our profession needs is a collective pension plan which would serve to lower administration costs and increase returns.   Ad hominem arguments about Bill Morneau’s (or anybody else’s) pension plan and benefits are really just not appropriate in this debate either- it’s simply an irrelevant way to argue your case.

My reading of this situation, having followed a lot of what is being written and having listened to all of Jane Philpott’s speech at the CMA, is that theses changes will go through.  A majority government in a democracy is powerful. Should there need to be concessions for doctors who have put all their eggs in one basket with the corporation?  Sure that would be nice but it’s not guaranteed. The outcry, social media and otherwise, over unilateral action against physicians in Ontario in 2015 resulted in exactly nothing changing except perhaps to further damage the professions’ relationship with both government and the broader general public .  Given this fact, the medical profession needs to ask itself how many bridges it’s willing to burn with the federal government over this issue?    I’ve seen this movie before and there is no happy ending if we keep going down this road. Avoid personal attacks and keep your arguments fact based, or you serve to undermine legitimate points yourself and others may make. Undisciplined bullying of others, on social media or otherwise, does nothing to advance your cause.  The CMPA has an excellent handout on advocacy and I suggest everyone getting involved in this argument read it entirely and follow its advice.

There has been minimal member consultation around the approach to these tax changes, and physicians who support them are now afraid to express their opinions for fear of being shouted down. The CMA’s position on these tax changes is questionable with a pretty big conflict of interest, given MD Management’s (a CMA subsidariary) large role in managing thousands of incorporated physicians’ finances. While it’s easy to rally opposition around a cause like this, I have seen no useful ideas or policy coming out likely to improve burnout amongst physicians, although it seems to come up a lot when discussing these changes. While you can make some physicians very angry by paying them less (or taxing them more), you simply aren’t going to improve physicians work-life balance or burnout rates by getting the suggested tax changes overturned- in fact it would more deeply ingrain the status quo. This is the ideal time to get rid of fee for service, which is, in my opinion, a huge contributor to physician burnout, and which would then obviate the need to incorporate. We need to establish a group pension plan, and allow restructuring of physician remuneration in a way which would better serve both doctors and patients.



2 thoughts on “Incorporation Anger

  1. Arguing that MD Financial creates a conflict of interest for the CMA on incorporation changes because they manage many physician’s corporate holdings ignores the fact that they also manage many physicians personal holdings. If incorporation becomes useless due to changes in taxation or legislation, most of that money will be moved to personal accounts and anyone who is currently a client of MD is likely to remain a client. I think the CMA is responding to the majority of physicians who do not support these changes by advocating on our behalf. Obviously in any situation, there will always be minority and majority opinions, and its difficult or impossible for one organization to advocate for both.

    I agree with you that the current funding model of physicians in Canada, where we fund significant amounts of health care infrastructure and try to make up for missing benefits through tax savings, functions poorly and unfairly. However Mr. Morneau has no plans to change any of that (and has been quoted saying that making up for any deals with physicians will be purely up to the provincial governments). One cannot burn down the current system without proposing a replacement. And the reality of current fiscal climates means that provincial governments cannot afford to buy out all the physician funded infrastructure and place all physicians on salaries with the same protections and benefit plans as other public service employees. So I welcome a reasonable and feasible alternative to the current system, but no one seems to have one to propose. In the meantime, saying that these changes are a done deal so we should not bother advocating against them defeats the purpose of a representative democracy. The government has to enact the policies it feels are best, and then we as voters must make our voices heard and advocate for our views. Come election time Canadians will vote for the party we feel best represents us. This is democracy in action.


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