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CMA's Submission to Finance Canada regarding proposed amendments to the Income Tax Act

https://policybase.cma.ca/en/permalink/policy10353
Date
2012-02-14
Topics
Physician practice/ compensation/ forms
  1 document  
Policy Type
Parliamentary submission
Date
2012-02-14
Topics
Physician practice/ compensation/ forms
Text
As previously indicated in the Retirement Income Improvement Coalition's (RIIC) letter to the Minister of Finance on August 10, 2011, the CMA supports the federal government's proposal to expand access to pensions, specifically by establishing a legislative and regulatory framework to permit pooled registered retirement plans (PRPPs). The CMA is concerned that as currently proposed, the PRPP framework, including Bill C-25 and the proposed legislative amendments to the Income Tax Act, would limit the potential for PRPPs to contribute to expanding access to, and investment in, pensions for self-employed individuals. With respect to the pension framework, a critical issue, two principles are central to the CMA's membership of over 76,000 physicians. These are, to encourage the federal government to: 1) ensure that self-employed Canadians can retire with an appropriate level of retirement income (e.g., a 70% of pre-retirement income target); and, 2) expand the retirement savings options that are available to self-employed Canadians. The CMA's comments herein on the proposed amendments to the Income Tax Act are in support of these two principles. As elaborated below, the CMA encourages the federal government to: 1. Increase the retirement savings capacity of self-employed individuals by raising the combined limit for RRSPs; 2. Expand the PRPP framework to include defined benefit and targeted benefit pension plans; and, 3. Clarify the eligibility criteria of "PRPP administrators" to include professional associations. 1. Increase the combined contribution limit for PRPPs and RRSPs As proposed, it is our understanding that the core benefit of the PRPP framework is in providing smaller businesses access to low-cost pension plans, thereby providing a vehicle to encourage employers to establish, and contribute to, pensions for their employees. While the CMA recognizes the value of, and supports, this objective, this proposal in effect maintains the status quo for self-employed individuals. Under Clause 10 of the proposed amendments to the Income Tax Act, the contribution limit to PRPPs would be calculated as an additional component of the current registered retirement savings plan (RRSP) contribution limit. As outlined in the Explanatory Notes, "an employer's contributions to an individual's PRPP account [and...] an individual's PRPP contributions in a taxation year will immediately reduce the individual's ability to make deductible RRSP contributions in that same year." While individuals with employer contributions stand to benefit from increased retirement savings via employer contributions, self-employed individuals are merely provided with access to an alternate retirement savings vehicle. As explained in the Summary Report on Retirement Income Adequacy Researchi, "[h]igher income groups tend to exhibit a greater tendency to substitute one form of saving for another since they tend to be bound by limits...[I]f newly introduced plans are included in limitations imposed on the degree to which contributions may be deductible for tax purposes, saving may not increase for individuals who are constrained (i.e. saving up to their limit), since they would more likely substitute one type of saving for another (e.g., RRSP for a private pension plan)." Therefore, the CMA encourages the federal government to consider increasing the retirement savings capacity of self-employed individuals by raising the combined limit for RRSPs and PRPPs. 2. Include defined benefit and targeted benefit pension plans As noted under Clause 12, the registration criteria for PRPPs will be established by the PRPP Act, Bill C-25. Of concern, Bill C-25 limits PRPPs to defined contribution pension plans by specifically excluding from eligibility of registration: (a) a pension plan as defined by 2(1) of the Pension Benefits Standards Act; (b) an employees' or a deferred profit sharing plan; (c) an RRSP or a retirement compensation arrangement defined by 248(1) of the Income Tax Act; and, (d) any other prescribed plan or arrangement. As highlighted by the Summary Report on Retirement Income Adequacy Research, "defined benefit pension funds and annuities enable investors to share longevity risks as well as pool risky investments to diversify risk." By pooling risk, defined benefit and targeted benefit pension plans provide more secure savings vehicles than defined contributions plans. The CMA encourages the federal government to expand the PRPP framework to include defined benefit and targeted benefit pension plans. While the CMA will advance this recommendation to the House of Commons Finance Committee during its consultation on Bill C-25, we include it as part of this submission as modifications to the proposed amendments to the Income Tax Act would be required. 3. Clarify the eligibility criteria of "PRPP administrators" to include professional associations Further clarification is required on the type of organization that may qualify as a PRPP administrator. As noted under Clause 12, an administrator of a PRPP is authorized under the PRPP Act. As Bill C-25, the PRPP Act, is still in the legislative process, the CMA will elaborate on this issue during the formal Parliamentary consultation. However, as it stands, further clarification is required on the eligibility criteria proposed by Bill C-25. While Bill C-25 can be interpreted to extend administrator eligibility to organizations that are able to fulfill the criteria established by the PRPP Act, Finance Canada's Framework for PRPPs states that eligibility of administrators would be limited to "regulated financial institutions that are capable of taking on a fiduciary role". Well-governed professional organizations that represent a particular membership should be able to sponsor and administer RPPs and PRPPs for their own members, including self-employed members. Conclusion While the CMA supports the proposed PRPP framework in principle, the proposed limitations to PRPPs should be addressed to ensure that they also provide value to self-employed Canadians, including physicians. The CMA appreciates the opportunity to comment on the proposed amendments to the Income Tax Act and to once again advance recommendations to Finance Canada on the PRPP framework. i Prepared for the Research Working Group on Retirement Income Adequacy of Federal-Provincial-Territorial Ministers of Finance.
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CMA's Submission to the House of Commons Standing Committee on Finance: Amending Bill C-25 to expand the PRPP framework to provide value to self-employed Canadians

https://policybase.cma.ca/en/permalink/policy10355
Date
2012-02-24
Topics
Physician practice/ compensation/ forms
  1 document  
Policy Type
Parliamentary submission
Date
2012-02-24
Topics
Physician practice/ compensation/ forms
Text
The Canadian Medical Association (CMA) supports the Government of Canada's efforts to improve Canada's retirement income system, specifically by establishing a legislative framework to permit pooled registered pension plans (PRPPs) as proposed in Bill C-25, the PRPP Act. The CMA has long supported the Government of Canada's efforts to expand access to pensions, including by permitting PRPPs. However, the CMA is concerned that as currently proposed, Bill C-25 limits the potential for PRPPs to expand the access to, and investment in, pensions of self-employed individuals. The CMA has participated in, and made recommendations to, Finance Canada over the course of the department's multi-year consultative process, including responding to the 2010 consultative paper Ensuring the Ongoing Strength of Canada's Retirement Income System. The CMA has also made recommendations to Finance Canada as a member of the Retirement Income Improvement Coalition (RIIC), which consists of 11 national professional associations representing over 1 million self-employed professionals. The following discussion and recommendations align with those previously made by the CMA and the RIIC. The pension framework is a critical issue to CMA's membership of over 76,000 physicians. In addressing the pension framework, including permitting PRPPs, two principles are central to the CMA's membership: to ensure that self-employed Canadians can retire with an appropriate level of retirement income (e.g., a target of 70% of pre-retirement income); and, to expand the retirement savings options that are available to self-employed Canadians. The CMA's comments herein, and recommendations to the Finance Committee to amend Bill C-25, are in support of these two principles. As elaborated below, the CMA encourages the Finance Committee to: 1. Amend Bill C-25 to raise the combined limit for RRSPs and PRPPs in order to increase the retirement savings capacity of self-employed individuals. 2. Amend Section 12(1) of Bill C-25 to expand the PRPP framework so it includes defined benefit and targeted benefit pension plans, which provide more secure savings vehicles than defined contributions plans. 3. Ensure the eligibility clauses of Bill C-25 (Sections 14-26) would allow well-governed professional organizations that represent a particular membership to be able to sponsor and administer RPPs and PRPPs for their own members, including self-employed members. 1. Increase the combined contribution limit It is our understanding that the core benefit of the proposed PRPP framework is in providing smaller businesses access to low-cost pension plans, thereby providing a vehicle to encourage employers to establish, and contribute to, pensions for their employees. However, as explained by the Explanatory Notes accompanying the proposed Income Tax Act amendments, "an employer's contributions to an individual's PRPP account [and...] an individual's PRPP contributions in a taxation year will immediately reduce the individual's ability to make deductible RRSP contributions in that same year." While the CMA recognizes the value of, and supports, this objective, this proposal in effect maintains the status quo for self-employed individuals. Like the Canadian population at large, physicians represent an aging demographic - 38% of Canada's physicians are 55 or older - for whom retirement planning is an important concern. In addition, the vast majority of CMA members are self-employed physicians and, as such, they are unable to participate in workplace registered pension plans (RPPs). At present, physicians are more reliant on registered retirement savings plans (RRSPs) relative to other retirement savings vehicles. While individuals with employer contributions stand to benefit from increased retirement savings via employer contributions, self-employed individuals are merely provided with access to an alternate retirement savings vehicle. As explained in the Summary Report on Retirement Income Adequacy Researchi, "[h]igher income groups tend to exhibit a greater tendency to substitute one form of saving for another since they tend to be bound by limits...[I]f newly introduced plans are included in limitations imposed on the degree to which contributions may be deductible for tax purposes, saving may not increase for individuals who are constrained (i.e. saving up to their limit), since they would more likely substitute one type of saving for another (e.g., RRSP for a private pension plan)." Therefore, the CMA encourages the Finance Committee to consider amending Bill C-25 to increase the retirement savings capacity of self-employed individuals by raising the combined limit for RRSPs and PRPPs. 2. Include Defined Benefit and Targeted Benefit Pension Plans As currently proposed, Section 12(1) of Bill C-25 limits PRPPs to defined contribution pension plans by specifically excluding from eligibility of registration: (a) a pension plan as defined by 2(1) of the Pension Benefits Standards Act; (b) an employees' or a deferred profit-sharing plan; (c) an RRSP or a retirement compensation arrangement defined by 248(1) of the Income Tax Act; and, (d) any other prescribed plan or arrangement. As highlighted in the Summary Report on Retirement Income Adequacy Research, "defined benefit pension funds and annuities enable investors to share longevity risks as well as pool risky investments to diversify risk." By pooling risk, defined benefit and targeted benefit pension plans provide more secure savings vehicles than defined contribution plans. The CMA encourages the Finance Committee to amend Bill C-25 to expand the PRPP framework to include defined benefit and targeted benefit pension plans. 3. Clarify the eligibility criteria of "PRPP administrators" to include professional associations Further clarification is required on the type of organization that may qualify as a PRPP administrator under Bill C-25. While Sections 14-26 of Bill C-25 can be interpreted to extend administrator eligibility to organizations that are able to fulfill the criteria it establishes, Finance Canada's Framework for Pooled Registered Retirement Plans states that eligibility of administrators would be limited to "regulated financial institutions that are capable of taking on a fiduciary role." The CMA encourages the Finance Committee to ensure that the eligibility clauses of Bill C-25 would allow well-governed professional organizations that represent a particular membership to be able to sponsor and administer RPPs and PRPPs for their own members, including self-employed members. Conclusion While the CMA supports the proposed PRPP framework in principle, the limitations currently proposed by Bill C-25 should be addressed to ensure that PRPPs also provide value to self-employed Canadians, including physicians. The CMA appreciates the opportunity to comment to the Finance Committee as part of its study of Bill C-25. Summary of Recommendations Recommendation 1 Amend Bill C-25 to raise the combined limit for RRSPs and PRPPs in order to increase the retirement savings capacity of self-employed individuals. Recommendation 2 Amend Section 12(1) of Bill C-25 to expand the PRPP framework so it includes defined benefit and targeted benefit pension plans, which provide more secure savings vehicles than defined contributions plans. Recommendation 3 Ensure the eligibility clauses of Bill C-25 (Sections 14-26) would allow well-governed professional organizations that represent a particular membership to be able to sponsor and administer RPPs and PRPPs for their own members, including self-employed members. i Prepared for the Research Working Group on Retirement Income Adequacy of Federal-Provincial-Territorial Ministers of Finance.
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Response to “Consultation Document – Disability Tax Credit Public Consultations” CMA Submission to Canada Revenue Agency

https://policybase.cma.ca/en/permalink/policy14025
Date
2014-12-19
Topics
Health systems, system funding and performance
Physician practice/ compensation/ forms
  1 document  
Policy Type
Parliamentary submission
Date
2014-12-19
Topics
Health systems, system funding and performance
Physician practice/ compensation/ forms
Text
The Canadian Medical Association (CMA) submits this response to the Canada Revenue Agency (CRA) as part of its public consultation on the Disability Tax Credit. The CMA has long-standing and significant concerns pertaining to the Disability Tax Credit. Most notable is the recent legislative development that resulted in physicians being captured in the definition of “promoter”. In light of the significant concern with physicians being captured in the definition of “promoter”, this submission will focus exclusively on the regulatory development following the enactment of the Disability Tax Credit Promoters Restrictions Act. However, the CMA will follow up at a later date with feedback and recommendations to CRA on how the Disability Tax Credit form and process can be improved. Prior to providing the CMA’s position for consideration as part of the regulatory consultation, relevant background respecting the CMA’s participation and recommendations during the legislative process is reviewed. 2. Background: CMA’s Recommendations during the Legislative Process The CMA actively monitored and participated in the consultation process during the legislative development of Bill C-462, Disability Tax Credit Promoters Restrictions Act. During its consideration by the House of Commons, the CMA appeared before the House of Commons Finance Committee and formally submitted its recommendations.1 The CMA’s submission to the Finance Committee is attached as an appendix for reference. Throughout this process, the CMA consistently raised its concern that the bill proposed to include physicians in the definition of “promoter”, to which the response was consistently that physicians would not be captured. The Member of Parliament sponsoring the bill conveyed this message at the second reading stage in the House of Commons: 1 Canada. Parliament. House of Commons. Standing Committee on Finance (2013). Evidence, May 7, 2013. 41st Parliament, 1st Session. Retrieved from www.parl.gc.ca/HousePublications/Publication.aspx?DocId=6138958&Language=E&Mode=1&Parl=41&Ses=1 “Mr. Massimo Pacetti: Mr. Speaker…[in] her bill, she says that the definition of a promoter means a person who directly or indirectly accepts or charges a fee in respect to a disability tax credit. Who is a promoter exactly? Is a doctor, or a lawyer or an accountant considered a promoter? Mrs. Cheryl Gallant: Mr. Speaker, that is an excellent question from my colleague opposite. We are looking at third party promoters quite apart from the regular tax preparers and accountants. It is a new cottage industry that sprung up once the 10- year retroactive provision was made. It recognizes that there are volunteer organizations and even constituency offices that do this type of work. They help constituents fill out applications for tax credits. There is a provision for exemptions so people who volunteer their time at no charge or doctors do not fall into this.”2 In contradiction to this statement, during the Senate National Finance Committee’s study of Bill C-462, CRA Assistant Commissioner Brian McCauley confirmed the CMA’s concerns, stating explicitly that physicians would be captured in the definition of “promoter” and explained “they have to be captured because, if they weren't, you leave a significant compliance loophole”.3 As will be explained further below in this submission, this statement reveals a lack of understanding of the implications of capturing physicians in the definition of “promoter”, in that it has established duplicative regulatory oversight of physicians, specific to the Disability Tax Credit form. 3. Priority Issue: Identify Physicians as an Exempt Profession in Regulation The CMA has been consistent in our opposition to the approach that resulted in physicians being included in the definition of “promoters”. The definition of “promoter” captures physicians who may charge a fee to complete the disability tax credit form, a typical practice 2 C. Gallant. (2013 Feb. 5) Parliament of Canada. Debates of House of Commons (Hansard). 41st Parliament, 1st Session. Retrieved at www.parl.gc.ca/HousePublications/Publication.aspx?Language=E&Mode=1&DocId=5962192#Int-7872066 3 Canada. Parliament. Senate. Standing Committee on National Finance (2014). Evidence, April 2, 2014. 41st Parliament, 2nd Session. Retrieved at www.parl.gc.ca/Content/SEN/Committee/412/nffn/09ev-51313-e.htm?Language=E&Parl=41&Ses=2&comm_id=13. for uninsured physician services. As indicated on page 4 of the CRA’s consultation document, the Disability Tax Credit Promoters Restrictions Act includes the authority to “identify the type of promoter, if any, who is exempt from the reporting requirements under the Act.” Two questions are included on page 7 of the consultation document in relation to this regulatory authority. It is the CMA’s recommendation in response to Question 12 (“Are there any groups or professions that should be exempt from the reporting requirements of the new Act?”) that physicians licensed to practice are identified in regulation as an exempt profession. Specifically, the CMA recommends that CRA include an exemption in the regulations for “a health care practitioner duly licensed under the applicable regulatory authority who provides health care and treatment” from the reporting requirements of the Disability Tax Credit Promoters Restrictions Act. As explained below, this exemption will not introduce a potential loophole that may be exploited by third party companies to circumvent the new restrictions and will mitigate the legislative development that has introduced duplicative regulatory oversight of physicians. 4. Exemption Required to Avoid Duplicative Regulatory Regime; Not a Loophole By capturing physicians in the definition of promoters, the Disability Tax Credit Promoters Restrictions Act has introduced a duplicative regulatory body for physicians: a development which the CMA has fundamentally opposed. As CMA understands it, the CRA’s key concern in capturing physicians in the definition of promoter is with respect to the possibility that third party companies may circumvent these limitations by employing a physician. As previously noted, this issue was raised by CRA’s Assistant Commissioner Brian McCauley in his appearance before the Senate National Finance Committee during its study of Bill C-462. A) CMA’s Recommendation Respects Existing Regulatory Oversight Regime of Physicians The CMA’s recommendation and regulatory proposal limits the exemption of physicians as a profession to those currently licensed under the regulatory authority of provincial/territorial medical regulatory colleges. In Canada, medical practice is the regulatory purview of provinces and territories. Charging a fee for the completion of a form is a typical practice for uninsured services – these are services that fall outside of provincial/territorial health insurance coverage. The practice of charging a fee for an uninsured service by a licensed physician is an activity that is part of medical practice. Such fees are subject to guidelines by provincial and territorial medical associations and oversight by provincial/territorial medical regulatory colleges. The regulatory oversight, including licensing, of physicians falls under the statutory authority of medical regulatory colleges, as legislated and regulated by provincial and territorial governments. For example, in the Province of Saskatchewan, the Medical Profession Act, 1981 establishes the regulatory authority of the College of Physicians and Surgeons of Saskatchewan. This regulatory authority is comprehensive and captures: medical licensure, governing standards of practice, professional oversight, disciplinary proceedings, and offences. In Ontario, this authority is established by the Regulated Health Professions Act, 1991; in British Columbia, by the Health Professions Act, 1996, and so on. B) CMA’s Recommendation Does Not Introduce a Loophole The exemption of physicians as a profession that is “duly licensed under the applicable regulatory authority who provides health care and treatment” would not constitute a loophole. Firstly, any concerns regarding the practices of a physician that is exempted based on this definition could be advanced to the applicable regulatory college for regulatory oversight and if appropriate, discipline. The CMA’s proposed regulatory exemption would not be applicable in the case of a physician not licensed to practice; in this case, the individual would not be under the regulatory authority of a medical regulatory college and would fall under the CRA’s regulatory purview, as established by the Disability Tax Credit Promoters Restrictions Act. With regard to the example raised by CRA’s Assistant Commissioner Brian McCauley in his remarks before the Senate Committee of a retired doctor hired by promoter, retired physicians can retain their licence. If this was the case for this particular physician, as noted above, when CRA had concerns regarding this physician’s actions, his or her regulatory college could have taken appropriate disciplinary action. If, on the other hand, this retired physician’s licence had lapsed, both the individual and the promoter who hired him or her would be potentially liable for fraud (assuming that the term “medical doctor” used in Form T2201 refers to an actively licensed physician) which would convey more serious consequences than those proposed by the Disability Tax Credit Promoters Restrictions Act. 5. Conclusion The CMA strongly encourages the CRA to identify physicians as a profession that is exempt from the reporting requirements of the Disability Tax Credit Promoters Restrictions Act. This exemption is critical to ensure that possible unintended consequences, specifically duplicative regulatory oversight of physicians, are avoided.
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