Saturday, July 22, 2017

Frustrated, Incorporated

Put me out of my misery.

At the dawn of the millennium, when I finished my medical training and entered independent practice, I was strongly encouraged to incorporate my practice. I'm probably more versed in financial issues than many of my peers - who were using their limited spare time to eat, sleep, and exercise - but the vagaries of tax planning are beyond the scope of my knowledge. An accountant - a tax professional - explained the pros and cons to me, the various ways I might use a corporation for retirement planning, estate planning, my children's education, and so on. None of this was shady. There was no way to funnel money to my pet, no labyrinth of phony bank accounts reducing my tax liability to zero, and the only thing I've ever left in Switzerland was in the restroom of the Zurich airport while waiting for a connecting flight.

None of it was exploiting loopholes that billionaires seem to magically get away with...just sound financial planning any business owner is supposed to make use of.

(As an aside, I'm not sure if there's a dime to be saved in the end by incorporating, as the accountant's bill "magically" goes up by an order of magnitude to prepare a tax return on a corporation, but I digress.)

Apparently, following the advice of a professional when it comes to money is now an act of exploitation, as the federal government is poised to do away with the benefits of incorporation, labeling them "loopholes to avoid tax". So, whatever optimism might flow from a rejuvenated doctor-government relationship at the provincial level, the feds, 'twould seem, taketh away. This is a particular sting for Ontario's doctors, as they negotiated the right to incorporate in lieu of a fee hike back in the early 2000s.

I've never been one to complain about my income, and will face a firing squad of my colleagues to say that at times I've felt I was overpaid. But the issue of professional incorporation isn't about income so much as its soundness as a financial planning tool, on the advice of informed professionals. There's nothing about an incorporated professional that's destabilizing to the national economy (as was the case when large businesses were becoming income trusts). This is just a cash grab by a federal government too enamored with its leader for its own good, and too cowardly to raise taxes on the real owners of Canada. You bully who you can, right?

Doctors probably shouldn't panic just yet. Because the issue is federal, and will affect doctors across the country, the Canadian Medical Association is taking the problem seriously. Moreover, doctors are far from the only incorporated professionals who stand to take it on the nose from the proposed changes to the tax code. Many lawyers and accountants - who stand to lose out on both their own savings and revenue from incorporated doctors - will oppose the federal government's proposal as well.

That said, average Canadians should pay close attention to the outcome of events here. After the cuts, the vilification in the press, the stripping of professional autonomy, a blow to doctors' retirement security might be the proverbial last straw, to say nothing of the acute and unfunded cost of restructuring or dissolving a corporation. Many doctors will take a serious look at their job prospects outside of Canada, and walk away without looking back. That can't be good news for Canada's ailing health care system.


  1. As you concluded, for some this will be the last straw.

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