CDA Essentials 2017 • Volume 4 • Issue 6

9 Issue 6 | 2017 | CDA at W ork B y now, you may be aware that Federal Finance Minister Bill Morneau is considering changes to the way the government taxes private corporations. If implemented, the proposed measures would have a significant impact on dentists who operate as Canadian-controlled private corporations (the majority of Canadian dentists) along with millions of other small business owners in various sectors. In a letter that opens the government’s discussion paper outlining the proposed measures, the finance minister says that the small business tax rates currently in place were designed to “help Canadian businesses reinvest and grow, find new customers, buy new equipment and hire more people.” But evidence that corporate structures are used by some to avoid paying taxes for personal gain, coupled with a significant increase in the use of private corporations since 2001, are “raising concerns about the fairness of the tax system” that allows a select few to gain an unfair advantage over those who are salaried or self-employed. In my opinion, the government’s view— that independent business owners have an unfair tax advantage over salaried employees—is based on a false equivalency: the financial risks that come with running an independent business are not in any way equal to the risks facing salaried employees. Dentists, like all small business owners, have no guaranteed pension, no health or dental benefits, no paid vacations, and face additional costs associated with office space and equipment, not to mention paying the salaries and benefits of their employees. Moreover, the government’s supposition from the outset— that these are “loopholes” and not the tax code working as it should—needs to be challenged. The proposed changes focus on three tax strategies used by private corporations: (1) income sprinkling (paying dividends to family members in lower tax brackets); (2) holding a passive investment portfolio inside a private corporation; and (3) converting a private corporation’s regular income into capital gains. The government has given the public until October 2 to submit comments on its discussion paper. As we go to press, CDA is working closely with the provincial and territorial dental associations to finalize its submission to the consultation process. The government’s discussion paper was highly technical, requiring no small degree of study. As such, CDA is working with taxation experts to get their analyses and reaching out to other like-minded organizations to share knowledge and develop a unified response. I can tell you there is broad agreement among these groups on the challenges ahead and the need for collective action. Dentistry remains focused on making the case that the government’s proposed actions do not meet their stated goal of bringing “greater fairness to the tax system,” and we will continue to work towards this goal well after the consultation deadline. From the President Larry Levin, dds Proposed Federal Tax Measures Target PrivateCorporations Details on the proposed tax changes: activty/consult/ tppc-pfsp-eng.pdf