Tax reform: It might not be much, but business owners and doctors can get federal mat leave benefits

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The Conservatives slammed the tax rate on small businesses in the Liberals tax changes and questioned whether wealthy Canadians will have to pay the same rate – Sep 20, 2017

Can self-employed Canadian access “special” Employment Insurance benefits like maternity and parental leave? Yes, they can, despite what opponents of Prime Minister Justin Trudeau’s proposed tax changes suggest – though they may not receive much.

At the heart of the tax-change ruckus is whether self-employed Canadians, like many doctors and small-business owners, should be able to continue incorporating and benefiting from special tax rules (aka loopholes) other Canadians paying personal income taxes don’t enjoy.

READ MORE: Here’s how the loopholes in the Liberals’ target work 

The Canadian Medical Association, which advocates on behalf of physicians, has been among the most vocal opponents to the proposed changes. And the Conservatives, led by Andrew Scheer, has joined them in their cause and expanded the criticism to include Canadian mechanics, fishers and boutique owners.

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Who’s eligible for EI benefits?

All the while, much of the focus has remained on women doctors and entrepreneurs, and their freedom to take a maternity leave.

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“[Trudeau] is attacking the entrepreneur who has to self-fund her maternity leave because she does not have a government-funded plan,” Scheer said in the House of Commons this week.

But, in fact, self-employed people can access parental leave benefits.

READ MORE: Canadian business owners aren’t quite united over Trudeau’s tax reforms: Angus Reid poll

“Doctors and other business owners are just as eligible as any other worker to participate in maternity and paternity provisions,” Employment Minister Patty Hajdu said.

In theory, the current tax rules for self-employed people and business owners are intended to help entrepreneurs grow their businesses and save for tough times. But the Liberals have said wealthy individuals are using three of the loopholes – the same three the government is proposing to close – to decrease their tax bill and, in the process, boost their take-home pay and personal savings.

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The CMA, however, claims the new rules on one of the loopholes, known as passive income, would make it more difficult for female doctors to save money for a maternity leave while also continuing to pay the steep overhead costs tied to running a medical office.

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Incorporated physicians, the CMA communications director noted in a recent series of emails with Global News, have to pay staff and their benefits, rent and equipment while off sick or on leave. None of that overhead can be covered unless incorporated physicians save from their corporation, the CMA spokesperson said.

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In those same emails, the spokesperson said she consulted with a tax lawyer who said incorporated physicians “don’t contribute to EI in their private corporations because as owners they are not entitled to” EI benefits.

“There are no sick leaves for entrepreneurs, nor are there EI benefits or maternity benefits for them,” she wrote.

READ MORE: Conservative leader Andrew Scheer says Trudeau’s ‘arrogance is astounding’

A spokesperson for the federal government, however, said that is not the case. Rather, all self-employed Canadians – including business owners – can opt into EI benefits to gain access to EI “special benefits” if they so choose.

Those special benefits include maternal and parental leaves, sick and compassionate care leaves and benefits for parents of critically ill children, according to Amélie Maisonneuve, with Employment and Social Development Canada.

Self-employed workers and business owners, such as incorporated doctors, are not, however, entitled to EI benefits as a result of job loss, the spokesperson said.

Global News asked the CMA to clarify its statement regarding eligibility for EI maternity and paternity benefits, but did not receive an answer by deadline.

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Clawing away benefits from business owners

While the EI program is indeed available to all self-employed Canadians and business owners, opting in may not be the best way to save for maternity leave.

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Anyone who opts into the EI program can opt out, according to the government, so long as they have not received any benefit payments; once a worker or business owner has received a benefit, they can no longer opt out, and have to continue paying premiums on their self-employed earnings as long as they are self-employed.

And in order to qualify for any of the special benefits, self-employed Canadians have to pay into it for at least one year.

READ MORE: Andrew Scheer says Justin Trudeau’s ‘arrogance is astounding’ on tax reform

As is the case for salaried Canadians, the government may claw back a portion of the benefits if the recipient earns money while on leave. What’s more, though, is if a company generates earnings while the owner is on leave and receiving a benefit, the government may claw back even more. (The federal department responsible for paying out EI benefits provides several detailed examples of different cases here.)

Still, individuals and groups opposing the Liberals’ proposed measures maintain the changes leave women in the lurch without any option for maternity leave.

Rachael Harder, a Conservative MP from Alberta has recently shared a couple of stories this week of her constituents.

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“One woman who came to me owns a local clothing store and said that she was saving up in order to hire a business manager and go on maternity leave … However, these changes actually defeat her ability to do that,” Harder said this week.

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On Monday, she offered the story of a 34-year-old doctor named Nicole.

“She is now working as a family physician in a rural area of Alberta. These changes will make it impossible for her to save towards maternity leave and start a family,” Harder told her colleagues in the Commons.

“Currently, there are provisions that support her as a woman by allowing her to save for parental leave, but the new changes will rob her of this very basic right.”

The Liberals have said the proposed changes will not be retroactive.

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