Freeland says provinces should use capital-gains windfall to give doctors a raise

Finance Minister Chrystia Freeland is pushing back on criticism from doctors who oppose Ottawa’s capital-gains tax increases, saying it will also raise billions in new provincial revenue that could boost health spending.

Ms. Freeland made the comments to reporters Monday after she tabled a ways and means motion outlining changes to capital gains that were first announced in the government’s April budget.

She also urged all MPs to support the motion when it comes up for a vote as soon as Tuesday. Conservative Leader Pierre Poilievre has not said where his party stands on the capital-gains tax change. A spokesperson for Mr. Poilievre sharply criticized the increase to the capital-gains tax inclusion rate on Monday, but said the party will carefully study the motion before making a decision.

The budget said the changes will raise $19.4-billion over five years for Ottawa and a further $11.6-billion for the provinces and territories.

“That’s a lot of additional money for provinces and territories. I would invite Canadians who feel that our doctors should be paid more to suggest that provinces and territories should be using some of that revenue to increase the actual salaries, the rate of compensation of doctors,” Ms. Freeland said.

A ways and means motion is a precursor to a government bill that implements a financial measure, such as changes to taxation rules.

Tax experts say the details released Monday do not appear to be significantly different from what was initially announced in the budget.

The government’s plan to increase taxes through changes to capital-gains rules was one of the most significant elements of Ms. Freeland’s April 16 budget.

A capital gain is the profit an individual or business earns when they sell an asset, such as stocks or property.

The budget said that as of June 25, the inclusion rate – the portion on which tax is paid – will rise to two-thirds from one-half on capital gains realized by companies. The increase will also apply to individuals, but only on capital gains above $250,000.

The Canadian Medical Association had strongly urged the federal government to grant incorporated doctors a similar carveout for the first $250,000 in capital gains that applies to individuals, if not a complete exemption.

CMA president Kathleen Ross said in an interview Monday that her organization is deeply disappointed that Ottawa did not agree to any of the suggestions from doctors. She said incorporated doctors are unlike other businesses as the corporation is primarily used as a vehicle for retirement savings or parental and sick leaves.

“There seems to be a continued misunderstanding of what makes Canadian medical professional corporations unique in this situation,” she said.

Hannah Jensen, a spokesperson for Ontario Health Minister Sylvia Jones, responded to Ms. Freeland’s comments with a statement that said Ottawa “continues to underfund key health services across the country,” while Ontario is making “historic investments” to expand its physician work force.

As for Ms. Freeland’s comments about provincial governments, she said, “We do support remunerating physicians according to their expertise,” but also said that pushing the issue onto other governments is not the right approach.

The capital-gains provisions were not included in Bill C-69, a government bill introduced on May 2 to implement parts of the budget.

The decision appeared by some to be politically motivated so that the Conservatives, who currently enjoy a substantial lead in the polls, would be forced to take a clear position on the issue.

Ms. Freeland has portrayed the change as one that requires Canada’s wealthiest to contribute more toward federal programs such as health and dental care and said Canadians should watch closely how all MPs vote.

Mr. Poilievre’s press secretary, Sam Lilly, said in an e-mail that the Trudeau government is scrambling to find ways to cover the cost of billions of dollars in new spending.

“This is a tax on health care, homebuilding, small businesses, farmers, and people’s retirements. Doctors, small business owners, and Canadians saving for their retirements have all raised opposition to Trudeau’s next tax hike,” he said.

Ottawa has said the higher tax rate will only apply to 0.13 per cent of Canadians in any given year. But some experts say it will likely capture a wider swath of the population.

For example, homeowners who have secondary properties such as a cottage or a rental property will be on the hook for the higher tax rate if their capital gain is more than $250,000.

“There are very, very few people that have an annual realization of $250,000 of capital gains every year. And if you do, you are in the wealthy for sure,” said Jamie Golombek, tax expert with Canadian Imperial Bank of Commerce’s private wealth unit. However, he said, “there are many more Canadians that could have a one-time capital gain over $250,000,” such as through the sale of a vacation property or sale of an income property.

The Finance Department said in a press release that a couple selling their cottage with a capital gain of $500,000 would not pay more tax. But that only applies if the couple jointly owns the property and they can each use the $250,000 exemption.

Canadians must complete their deals by June 25 if they want their capital gain to be taxed at the lower rate, according to the ways and means motion.

Chartered Professional Accountants of Canada, which represents the profession at the national level, welcomed the release of more details on the upcoming tax change. But John Oakey, vice-president of taxation at CPA Canada, said a lead time of just two weeks before the new rules take hold will make it very difficult for many affected taxpayers to rearrange their affairs in time.

Brian Ernewein, a senior adviser at KPMG and a former senior Finance Department tax official, agreed the situation creates a tight window for affected Canadians to make decisions.

“People will be scrambling. I think there’s no question,” he said.

With reports from Erica Alini in Toronto