Ontario Dentists Propose Higher Fees to Combat Effects of Federal Tax Changes
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The Canadian Federal Government has proposed tax changes which adversely impact small business owners including dentists. You can see the legislation here: https://www.fin.gc.ca/activty/consult/tppc-pfsp-eng.asp
The main proposal with the most harmful effects to the profession will be the aggressive taxation on passive investment within corporations. The legislation behind "income sprinkling" and "converting income to capital gains" also needs tweaking to avoid undue stress and high accounting fees on business owners, but are more reasonable.
As the deadline for the consultation period approaches, it seems very likely that the Government will proceed with all the changes. Bill Morneau fails to acknowledge any opposition, while praising special interest groups who share his views, yet are generally unaffected by the changes. For reference, his twitter account: https://twitter.com/Bill_Morneau
If the changes are passed as written, as a group of affected professionals we need an action plan. What we are proposing to our association:
1. Increasing the Ontario Dental Association (ODA) Fee Guide for all services provided by 10-15%.
2. Negotiating publicly funded dental program fees to meet a minimum compensation of 70% of the ODA Fee guide.
1. Many people are not aware that passive investments within corporations are subject to the highest rate of capital gains tax on growth, regardless of the amount claimed. The funds are further taxed at the appropriate personal tax rate when withdrawn. The proposal with regards to passive investments within a business may reach tax rates over 70%. This will severely hamper a dentist's ability to effectively manage a dental practice and to retire. Capital kept within a business account is essential for dental offices to maintain and purchase equipment, expand, make up for slow times, cover maternity leaves etc. The excess capital at the end of a dentist's career accumulated within the business will be taxed when withdrawn at the appropriate marginal tax rate, and often allows the dentist to retire. Taxing investments made by a business would be similar to aggressively taxing pension plans or retirement plans for workers without notice.
Due to the changing business climate, ownership of dental offices is forecast to be significantly less favorable. Several dental practice brokers have already issued letters expecting negative pressure on the practice market. Decreases in practice value are anticipated if the tax changes are passed. Most dentists rely on their equity built within their office to fund their retirement at a decent age. Their office is their life's work. The 10-15% increase to fees will allow dentists to maintain their after-tax incomes, as well as the value of their offices (generally valued at multiple of gross revenue). These proposed tax changes are too rapid, and will affect the retirement plans of many dentists.
To everyone who is not a dentist, this is a reminder that dentists are well compensated for the education, training and investment they make into their occupation, however they are not rich. "Rich people" who abuse stock option salaries may be compensated over $10 million a year (more than an average dentist makes in their lifetime) paying only a 26.765% combined marginal tax rate in Ontario. The Government speaks of fairness, yet scrapped the campaign proposed changes to increase tax on stock options. This was after very wealthy Bay Street executives and Bill Morneau's corporate friends lobbied against them. If we would like to address fairness, we must do so in all sectors, not just focus on the perceived easy small business targets. The proposed changes create a class war, while deflecting from the real "loopholes" for the ultra rich. What is in place for a small business owner, contractor, or entrepreneur in lieu of a Public Servant Pension Plan or employment rights? Offshore tax havens are also still available for select large corporation operating in Canada. Ask Bill Morneau about them, he is mentioned in the Panama Papers for a corporation held in the Bahamas.
2. It is time for the Ontario Government to finally "pay their fair share". The publicly funded Dental programs in Ontario: Healthy Smiles, Ontario Disability Support Program and Ontario Works are amazing programs provided to those in need. The compensations for dentists who choose to treat these patients are as low as 20-30% of the suggested fee guide on routine dental work, and have not been increased in over ten years. Dental practice overhead can be over 70%, meaning treating these patients usually loses an office money. A dentist should not have to reject patients due to the risk of financial hardship based on their coverage. Imagine, at your occupation routinely receiving a reduced wage, or paying your employer because you serviced a certain group of people. It's just not fair. With the proposed tax changes, the Provincial Government will be a direct beneficiary of the increased tax revenue. Therefore, dentists will have even less incentive to continue to subsidize treatments on these patients for the Government. The Ontario Government must pay their fair share if they would like to have privatized clinics continue to accept these under funded programs.
Unfortunately, conventional attempts in the past to negotiate with the Ontario Government have been unsuccessful. The Provincial Health Minister refuses to acknowledge the issue or meet with representatives from the dental community. If the federal tax changes are passed, we propose the ODA introduce a mandatory publicly funded fee guide at 70% compensation of the ODA Dental Fee Guide, indexed yearly. This is more than reasonable, as it gives the Government a significant discount to services rendered, while allowing overhead requirements to be met. To implement this, we must stand together and give the provincial Government a deadline of July 1, 2018 to commence mandatory negotiations. If the Government fails to do so, we must take action. We propose the ODA should release their own version of the fee guide for these programs, and all charges on services be non-assignment. The patient will only be reimbursed the amount the Ontario Government is willing to accept. We hope the Government does not ignore our plea for negotiation, and meets with representatives to negotiate and finally pay their fair share.
Prime Minister Trudeau believes these tax changes make the tax system “fair”, and better for the middle class. He fails to understand that these tax measures will directly increase the cost of living on those in the middle class he vows to protect. The general cost of services in multiple sectors will likely increase due to decreased profits. Dentists work extremely hard for their income, as do the hygienists, dental assistants, office managers and receptionists that work alongside them. Taxing a small business is in no way favourable to the employees in any industry, since decreasing profits entice cost saving measures such as cutting hours and staff. Business income is not synonymous with personal income, and the public should not be misled to believe otherwise.
If you are a dentist or member of the public against these tax changes, and agree with our proposals, please sign this petition and share.
A group of concerned dentists
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