Measuring Physicians' Incomes with a Focus on Canadian-Controlled Private Corporations

Understanding physician remuneration and its growth is extremely complex, much more so than for a typical worker. Highlighting one narrow aspect of this issue, this paper focuses on governments' increased incentives for physicians to incorporate and the ensuing physician response in the period 1996-2011. Nationally, incorporation rates increased for both general practitioners and specialists between 1996 and 2011. We observe that the largest changes in provincial regulation were in Ontario, and incorporation increased from 18% in 2001 to 54% five years later. Incorporation is less common in Quebec, where the incentives were the weakest. Married male physicians, middle-aged physicians (regardless of sex), physicians with higher incomes and physicians born outside of Canada are all more likely to incorporate their practices. On average, incorporated physicians realized a 4% reduction in personal income taxes and accumulated retained earnings of at least $10,000 per annum in their Canadian-controlled private corporations in our data period. The benefits of incorporation stem largely from retained earnings and income splitting. Many physicians benefit from one or both; however, the benefits of incorporation are not equally distributed. Sex, marital status and income affect the magnitude of the financial benefit of incorporation.