Finance Minister Bill Morneau is defending a $70-million tax change that has infuriated Canada's medical community, saying it is simply aimed at clearing up the tax rules for all professionals who run a small business.
Senators grilled the minister Tuesday as he appeared before the Senate national finance committee to defend his latest budget bill, C-29.
Mr. Morneau was asked to address concerns raised by physician organizations about a tax change that would limit how professionals working in a grouped corporate structure can access the small-business tax deduction.
"Don't you expect this to have a negative impact on Canada's ability to attract and keep physicians, especially specialists?" Conservative Senator Salma Ataullahjan asked.
"We believe the approach we've taken is fair across small businesses," Mr. Morneau replied. "We are not treating physicians in any way different from other professionals or other small businesses. What we're saying is one small business is able to have one small-business deduction."
The government argues professionals working under one corporate entity should not be able to claim they are each stand-alone small businesses for tax purposes. The measure was announced in the March budget as an effort to address "the ability of high-net-worth individuals to use private corporations to inappropriately reduce or defer tax."
The Canadian Medical Association has warned this change will mean tens of thousands in additional taxes owed for some physicians. The Ontario Association of Radiologists has said the change represents a "tipping point" that, when combined with unresolved financial battles with provincial governments, will lead many specialists to leave for the United States.
Mr. Morneau also confirmed in committee that the tax change related to small businesses will raise $70-million a year in new revenue. The change applies to a wide range of professionals, but physicians have mounted an aggressive lobbying campaign to argue that unlike other professionals, they are not able to pass along higher operating costs to consumers. They also say the groupings lead to better health care.
Several medical professionals are scheduled to outline their concerns to the committee Wednesday, including Dr. Richard Davies, a cardiology professor with the University of Ottawa Heart Institute.
Dr. Davies told The Globe and Mail on Tuesday that the change will hurt the ability of organizations such as the Ottawa Heart Institute to attract top talent.
"It just hurts us. It makes it harder for us to get and retain the doctors that we want," he said. "It makes it more difficult to support research. It makes it more difficult to support teaching. It makes it more difficult for us to provide the complete range of care regardless of whether or not the provincial system is funded properly."
Dr. Davies said these medical partnerships were created to pool income to help cover costs for health services that are needed but not well-covered by provincial plans.
"We've used the mechanism of being a partnership not to make more money but to be able to allow us to practise that kind of medicine. And what this does is it selectively disadvantages doctors who want to join our practice compared to doctors who just want to go out into the community," he said.
Prime Minister Justin Trudeau's decision to appoint a large number of senators who sit as independents has created some uncertainty as to how the Senate will deal with government legislation.
Three senators on the committee – including an independent, a Liberal and a Conservative – all raised concerns with a clause in Bill C-29 that amends the Bank Act to assert that federal consumer-protection laws and regulations related to banking are "paramount" to provincial law.
The change is in response to a 2014 Supreme Court ruling. It outlines principles that banks must follow related to disclosure, fairness and accessibility.
Liberal Senator Paul Massicotte told the minister he's concerned the clause would reduce consumer protection in provinces with stronger rules and called for the section to be deleted.
"I'm not so sure the provinces understand what's happening with this paragraph," he said. "This paragraph should be amended, should be removed."
Mr. Morneau rejected the idea, even though the government already accepted an earlier amendment to the bill that was made by MPs on the House of Commons finance committee.
"We see this as one bill in its entirety," he said. "We view the consumer protections that we're putting in as an enhancement of consumer protections across this country."