A North Vancouver family doctor is crying foul over proposed federal tax reform she fears would kill her long-standing savings strategy and those of other small business owners.
The professional advice Dr. Ramona Penner received when she first started practising in the early 1990s was: If you’re not going to spend everything you earn, then you should incorporate.
Penner’s saving-for-a-rainy-day strategy involves “income sprinkling” with her husband, who manages the household more while she works long days.
This summer the federal government announced plans aimed at ending what it calls tax loopholes, where those who own a business can transfer money to a family member in a lower tax bracket.
Other tax-savings strategies Ottawa is looking to change centre around using private corporations to make investments and converting income into lower-taxed capital gains.
“I’m now at the point where I could have used income sprinkling for my two kids who are 18 to go to university,” said Penner.
Still, Penner concedes she is not as badly off as new doctors trying to gain a foothold in B.C. and often carrying a student debt load of more than $200,000.
There’s already a doctor shortage in B.C., said Penner, in part because some physicians are choosing to practise in the U.S.
“For them, where is the motivation? Our income is controlled by the government. Now they want to take away any tax breaks or ways of saving that we had,” said Penner, adding B.C. doctors don’t get disability insurance, sick leave, vacation pay, a pension fund or other employee benefits.
While doctors have been some of the most outspoken on the proposed tax reform, North Shore small business owners are also concerned about how the changes will impact them.
“And it’s not only the change but it’s a radical change all in one go. So it’s both the speed and the way it’s being introduced,” said North Vancouver Chamber CEO Patrick Stafford-Smith.
Asked how this proposed tax reform could change North Vancouver’s small business landscape, Stafford-Smith said it certainly makes it more difficult for businesses to be viable and productive.
“And I think that it’s a very big hammer for a problem that might be better dealt with on a specific basis, then the people that they believe are unfairly – if that’s the case – using the tax system as is,” said Stafford-Smith.
North Shore Sports Medicine general manager Sohail Kamal said he is struggling to fully comprehend the proposed changes and is worried about the future of his established business.
“Cash flow is incredibly important to small businesses, and the proposed reforms will make it harder for us to save for leaner times,” said Kamal. “The result is we will delay our planned staffing increases and delay our planned expansion.”
The Liberals held a consultation period on the proposed changes from July 18 to Oct. 2. During that time the three North Shore members of Parliament said they received plenty of feedback from constituents.
West Vancouver-Sunshine Coast-Sea to Sky Country MP Pamela Goldsmith-Jones said she apologizes on behalf of the federal government for the language used during tax reform discussion, and for the short notice.
Some doctors claim the government painted them as tax cheats.
Goldsmith-Jones said while it sounds like the government is casting a wide net with its proposed tax reform, it really only applies to a few businesses.
When it comes to passive investment, Goldsmith-Jones said business owners should be able to keep a fair amount in passive income to protect against market fluctuations.
Burnaby North-Seymour MP Terry Beech said he’s expressed various tax reform concerns directly to the federal finance minister and cabinet and is “confident that the forthcoming legislation will strike the right balance.”
Meanwhile, North Vancouver MP Jonathan Wilkinson said several issues raised by his constituents require consideration by the government.
Those concerns, said Wilkinson, include accounting for differences that exist between small business owners and salaried employees with respect to certain benefits and the level of risk incurred.
Hundreds of contrarian doctors in B.C., including two from North Vancouver, have spoken out to say they welcome the changes and have signed an open letter to Finance Minister Bill Morneau.
Those doctors see income tax equality as an opportunity for the government to spend more money on health care.
Goldsmith-Jones said she will likely host a town hall meeting at a later date to keep constituents informed of how any tax reform would be rolled out.
