Canadian Manufacturing

Red tape costing Canadian small biz ‘significantly’ more than US counterparts: CFIB

Canadian small businesses pay 45 per cent more per employee to comply with government regulation

TORONTO—Most businesses in Canada pay more per employee than their counterparts in the United States to comply with regulatory requirements, according to a report issued by the Canadian Federation of Independent Businesses.

According to CFIB, the largest cost difference was found in the small business category (fewer than five employees)—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 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 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 federal government announced an ambitious strategy to cut red tape last fall, 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.”

The report was issued the same day the federal government planned to announce what it called “red-tape-cutting initiatives that will generate significant administrative savings for Canadian businesses.”

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