Ontario Premier Doug Ford speaks during an announcement at Ottawa city hall, on April 5.Adrian Wyld/The Canadian Press
Ontario Premier Doug Ford and the province’s medical association are criticizing the federal government’s new capital-gains tax increase, saying it will negatively affect doctors and could force them out of practice.
Mr. Ford said tax changes contained in Prime Minister Justin Trudeau’s federal budget, released earlier this week, would hurt investors and doctors. He also warned that the federal Liberals will face electoral consequences for raising taxes.
“I’ve been getting more messages from doctors than ever before this morning,” Mr. Ford said at an unrelated news conference in Oakville, Ont., west of Toronto.
“They’re gonna get hurt the most and everyone else that builds up a business, you try to sell it, they’re gonna get gouged as well.”
Tuesday’s budget outlined changes to how capital gains are taxed. As of June 25, the inclusion rate for companies – the portion of a capital gain on which tax is paid – would increase to two-thirds, up from one half. The increase would also apply to individuals, but only on capital gains above $250,000. (A capital gain is the profit an individual or a business earns when they sell an asset such as stocks or property.)
Doctors often set up professional medical corporations, which would mean any capital gains would be subject to the higher inclusion rate.
John Oakey, vice-president of taxation for the Chartered Professional Accountants of Canada, said many doctors who set up corporate entities invest inside those corporations as part of their retirement planning.
He said once the inclusion rate increases, they’ll face an additional tax when liquidating their investments.
“They will be more dramatically impacted,” he said, adding that this change, along with others over the past several years, have created unpredictability in the system.
The Ontario Medical Association (OMA) also warned that the changes will negatively affect physicians in Ontario and ultimately affect access to patient care.
Kimberly Moran, chief executive of the OMA, said the organization has already heard from many of its members “who have raised serious concerns about how this additional and unnecessary tax will affect their practices.”
“Physicians are already subject to substantial challenges in funding due to significant inflationary pressures, and this additional economic hardship puts further pressures on the viability and sustainability of a fragile system,” Ms. Moran said in a statement. “This disincentive could force existing physicians out of practice and dissuade new grads from practicing in Canada.”
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She added that Ontario and every part of the country are experiencing a doctor shortage and that the tax proposal only contributes to this serious situation.
The Liberal government asserted that the tax changes would only affect the ultrawealthy. But Mr. Ford disputed this claim, saying that average people investing in a small number of stocks over the years will feel the impact as well.
“You don’t have to be a multimillionaire to have investments at $250,000. So when you sell it, then you’re gonna get gouged 66 per cent,” he said.
Conservative Leader Pierre Poilievre, in an interview on a City News radio show Thursday, said he is still reviewing the changes but that he believes middle-income Canadians will be affected by it because many rely on secondary properties as their retirement investment.
“It will always and everywhere be the middle class, which has become the working poor under Trudeau, who will pay the price and it’s clearly not worth the cost,” he said.
In the federal budget, the government unveiled about $53-billion in new spending for a housing strategy and affordability measures such as pharmacare, as well as defence, Indigenous services, and research and innovation.
The Liberals say Ottawa will pay for the new spending in part by raising $19.4-billion in revenue through changes to the capital-gains tax rules.
The budget does also increase the lifetime capital-gains exemption – which allows small-business owners to avoid paying tax on some capital gains when they sell their companies – to $1.25-million from $1-million.
For the changes concerning individuals, the government says the policy will have the greatest effect on the wealthiest Canadians who have large amounts of money tied to investment earnings that are outside of sheltered tax accounts, such as a registered retirement savings plan or a tax-free savings account.
However, many more Canadians could face tax increases for a year where they have a big financial event such as the sale of an investment property, family cottage or a large one-time sell-off of a person’s retirement portfolio.
At a postbudget news conference in Burlington, Ont., on Thursday, Finance Minister Chrystia Freeland championed the tax hikes as a selling point of her budget.
“We raised some additional revenue, asking those at the very top to pay a little bit more,” Ms. Freeland said. “That is what is financing the big investments in housing and affordability and economic growth that the federal government is making.”
Katherine Cuplinskas, a spokesperson for Ms. Freeland, said the changes were “carefully designed” to make the tax system fairer and added that the government also introduced a new Canadian Entrepreneurs Incentive, which will leave an entrepreneur better off with up to $6.25-million in capital gains. She said the changes keep Canada’s capital-gains tax rates competitive with jurisdictions such as California and New York.
The Globe and Mail asked the government for a breakdown of how many people, and in which income brackets, will be affected by the capital-gains changes. The Finance Department said it did not yet have those calculations available.