The Shop's Business: Dealing with Government, 1974-1978

Federal Excise Tax

One aspect of Canadian society that had a strong appeal to the American exiles was Canada’s welfare state. Canadians not only have the reputation of being gentler and less likely to offend than Americans, their public policy also expressed a “caring and sharing” attitude that was lacking in the southern United States. This impacted both nations’ tax rates. In the same way that the American idea about the “social contract” leads to lower taxes, the Canadian idea leads to higher taxes. As a small business operating on a small budget with no profit margin, the leather shop felt the Federal tax burden acutely.

The leather shop was first given a Federal Excise Tax license in September 1970. In response the shop developed a complicated bookkeeping scheme to minimize the Federal tax on manufactures. The system involved separate manufacturing, wholesaling and retailing entities. In March 1971 Cow Products, a business registered by George Mullins and Madelyn Averitte, obtained a Federal and Provincial tax license and began selling leather goods to Fourth World (our wholesale operation) and Ragnarokr (our retailer). Cow Products (the manufacturer) sold cheaply to minimize Federal Sales Tax. In January 1973 Crow Goods, a wholesale leather goods business runs by Chris Risk, replaced Cow Products. The Ragnarokr book keeping system involved three sets of books and three independent businesses. Although the names changed over the years, one company was always a manufacturing business, one was a wholesale business and the other a retail store.

This system worked only because the leather shop hired a part-time bookkeeper. For years, beginning in 1973, Steven Burdick, a graduate student at the University of Toronto, worked a few hours each week to keep the three sets of books and pay the bills. In January 1975 the system changed slightly and Ragnarokr was given another Federal Sales Tax license and set up a similarly complex record keeping system for sales tax purposes. By May 1977 Ragnarokr’s bookkeeper had to keep track of sales of 14 categories of goods for Federal Sales Tax purposes. Each category of sales was taxed at a different rate.

By 1977 the Federal Tax law and Ragnarokr’s business had both changed and Philip began a long correspondence with Revenue Canada with the intention of avoiding Federal Sales and Excise Taxes altogether. After over a year of negotiations, Ragnarokr was given the status of a “small manufacturer.” This meant that the Federal Sales Tax license it received in January 1975 would be cancelled and the shop would no longer have to keep track of 14 categories of sales. In April 1978 the FST license was cancelled and Steven Burdick resigned as the bookkeeper after three years service. By then the leather shop was paying about $600 per year in Federal tax and paying Steve Burdick about $500 per year for his bookkeeping services.

Unemployment Insurance (UIC)

For many years a key part of the Canadian “safety net” was its Federal Unemployment Insurance (UIC) scheme. The law stipulated that if an employee lost his job, he could apply to the Unemployment Insurance Commission for assistance while he searched for work. In Canada many jobs were seasonal and it was not unusual for an individual to work for the minimum period of 20 weeks and then, upon losing his job, draw a check from UIC or “pogey” until his benefits ran out. The plan did not cover self-employed individuals. In 1974 the ownership of the leather shop was changed so that some of the craftsmen could take advantage of Unemployment Insurance.

The registered owners of Ragnarokr became George Mullins and Bie Engelen. Everyone else was technically an employee of Ragnarokr and hence able to participate in the Government’s Unemployment Insurance program. Colleen began work as the employee in September 1974, worked for 20 weeks and was laid off in January 1975. Philip began work in January and was laid off in April 1975 after having worked 20 weeks. Mary was an employee from January until May 1977 and from May until October Bill Rauton was an employee. Colleen became an employee again from February until December 1977 when she was laid off again. Philip was hired by Ragnarokr on November 1977 and laid off in March 1978. In May 1978 Ragnarokr hired Bill Rauton as a trainee for May and June and again in August through October. He probably worked 20 weeks.

Ruth Lyons was the employee at Ragnarokr during April and May 1979 and again in July and August 1979. Beginning in September 1979 Ruth Lyons began working steadily at Ragnarokr and continued until May of 1980 when her hair caught in the polishing line and she lost a patch of her hair. She returned to work again for the Christmas season of 1980. From October 1979 until February 1980 Colleen worked in a trainee position with Randy Rauton as the instructor. Canada Manpower subsidized both jobs.

It’s impossible to say how many of the laid-off Ragnarokr employees actually applied for and received UIC. Philip did apply for unemployment compensation in June 1978 while living in South River but was cut off in July for not maintaining contact with the UIC office in North Bay. The leather shop discontinued the program after 1979. In the 1990s the shop did have one employee who was paid by the hour but the other craftsmen worked on commission and were considered owners. Because the workers at the leather shop earned so little, they all received a subsidy to cover the costs of the Province’s universal health care program, the Ontario Health Insurance Program (OHIP). OHIP provided excellent basic health care at extremely favorable rates. The leather shop did not take advantage of the numerous programs available to it as an employer except that during its early years it provided numerous American exiles with job offers that enabled them to legalize their status in Canada.

In later years, when it became more and more difficult to immigrate, individuals without papers occasionally borrowed those of friends who were legal immigrants so they could work. This practice was so common on Baldwin Street that in November 1978 when Olabanji Famewo, an undocumented immigrant and a native of Nigeria, was given a job at Silverstein’s Bakery using Philip’s name, the manager there recognized the name but not the man. Several Mexicans had already worked at Silverstein’s using Philip’s name and identification. Other individuals worked at the University of Toronto using the name of Philip Mullins.

The narrative continues at The Christmas meetings 1969-1980