Regulatory red tape weighs on Canadian biz owners

Businesses in Canada pay more per employee than their U.S. counterparts to comply with regulatory requirements, says a report issued by the Canadian Federation of Independent Businesses (CFIB).

The launch of the report kicks off Canada’s 4th annual Red Tape Awareness Week. It also provides the first-ever direct comparison of these costs. The largest cost difference was found in the small business category, with owners in Canada paying 45% more per employee than those in the U.S. The total cost of regulation to Canadian businesses is $31 billion a year.

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The CFIB says this amount has remained relatively stable since it first started estimating regulatory costs in 2005.

“Not all regulation is red tape, but businesses in both countries tell us regulatory costs could be reduced by about 30% without harming the important health and safety objectives of regulation,” says CFIB executive vice-president Laura Jones.

She adds, “That’s the equivalent of a $9 billion stimulus package each year in Canada with no downside.”

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The report also finds about one-third of business owners wouldn’t have gone into business had they known about the compliance burden, compared to about a quarter of U.S. businesses. In Canada, 68% of businesses say red tape significantly reduces productivity, compared to only 57% in the U.S.

“Reducing [regulatory costs] should be a continuing priority to ensure Canadian businesses remain competitive” both here and on the international stage, says Dennis Fortnum, Canadian managing partner at KPMG Enterprise.

The federal government announced an ambitious strategy to cut costs last fall called the Red Tape Reduction Action Plan.

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“If it sticks to the plan, it could be a game-changer for Canada,” says Jones.

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