The Cat and Mouse Game

Much of our business is built on research, due diligence and case law. But what does that really mean? It means that back in 1969, when Ralph Sazio challenged the world to do it differently, he set in motion the cat and mouse game between the government and its everyday citizen. Mr. Sazio, was offered the coaching position of the Hamilton Tiger-Cats, and he was eager to accept. After all, he played the game and now was his chance to coach the Tiger-Cats. He accepted on one condition. Hire me as an independent contractor rather than an employee. Simple right? The football club accepted his offer and on they went.

But wait, this was not usual. Why would he want to do this? He wanted freedom. He thought of himself as a business offering his knowledge and expertise as any business would – except now, not in the form of a corner grocer, but rather one that doled out expertise, talent, experience, skills and a special ingredient that the Tiger-Cats needed to win, him!

So what did that mean? It meant that Mr. Sazio would get a favourable tax rate, control over his own products and services, flexibility over how he did his work. He took all the risk. He accepted that there wasn’t employment law to protect him; he accepted that he was to figure out his own health program; he had to use his own control and risk to manage his own business. Welcome to the world of being an entrepreneur.

“How can we allow this?”, thought the government. “How can we allow the general population to break away from the mould we have created? We have a system that works for collecting taxes and keeping things in control. This goes outside the bounds of the normal and upsets the balance. What if others follow suit?” So the federal government took the next decade to come up with rules to stymie the entrepreneurial spirit of those that followed Mr. Sazio’s lead.

In 1981, the CRA introduced rules that set out guidelines to differentiate an employee from a contractor. Contractors adjusted to the new rules. In fact, the birth of “recruiting firms and intermediaries” emerged, simply to “third party” the contractor to protect the contractor. Ah, but CRA was relentless! In court, they used their rules to show that even using a third party was not a possible solution and that nothing was going to protect them. Despite court rulings, assessments, audits, CRA finally decided that pain was the only solution.

In 2011, they introduced a painful, punitive tax rule that if a contractor was indeed found to be an “incorporated employee” they could realistically face consequences like bankruptcy. Why? I may not know all the metaphors in the world but I think this one fits: let’s throw the baby out with the bath water! What are we doing to the entrepreneurial spirit in Canada? I can think of countless examples of businesses that started with one person. Every single one of them! This cat and mouse game has to end before the baby walks to another country to call home and builds that nation instead of ours.