Red tape costs Canadian small businesses more than U.S. counterparts: study

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

According to CFIB, the largest cost difference was found in the small business category (fewer than five employees), which is the largest category for businesses in Canada and the U.S. Businesses of this size pay 45 per cent more per employee in Canada ($5,942) than their U.S counterparts ($4,084) to comply with government regulation, the CFIB report indicates.

The total cost of regulation to Canadian businesses is $31 billion a year, which has remained relatively stable since CFIB first started estimating regulatory costs in 2005.

The total cost of regulation in the U.S. is $198 billion.

“Not all regulation is red tape, but businesses in both countries tell us regulatory costs could be reduced by about 30 per cent without harming the important health and safety objectives of regulation,” CFIB executive vice-president Laura Jones said in a statement. “That’s the equivalent of a $9-billion stimulus package each year in Canada with no downside.”

The CFIB report also found about one-third of business owners in Canada might not have gone into business had they known about the burden of red tape, compared to about a quarter of U.S. businesses.

In Canada, 68 per cent of businesses say red tape significantly reduces productivity, compared to 57 per cent in the U.S. “The results of this report are clear: reducing red tape should be a continuing priority to ensure that Canadian businesses remain competitive here in Canada and on the global stage,” KPMG Enterprise Canadian managing partner Dennis Fortnum said.

The report also lauded an ambitious plan announced last fall by the federal government to cut red tape, called the Red Tape Reduction Action Plan. “The government had great instincts to identify this as an issue impeding prosperity,” Jones said. “If it sticks to the plan, it could be a game-changer for Canada.”

To read the full report, go to this link.