Red Tape Is Costing Canada’s Economy: Business Group

January 13, 2011 Updated: October 1, 2015

According to the Canadian Federation of Independent Business, estimates show that reducing rules and regulations by 25 percent across the country would result in stimulating the economy by $7.5 billion annually. (Photos.com)
According to the Canadian Federation of Independent Business, estimates show that reducing rules and regulations by 25 percent across the country would result in stimulating the economy by $7.5 billion annually. (Photos.com)
Red tape, the bane of businesses everywhere, is being targeted by an organization that wants to raise awareness about the negative impact of excessive regulation on both small business and citizens.

During its Red Tape Awareness Week from Jan. 10 to 14, the Canadian Federation of Independent Business (CFIB) encourages entrepreneurs across Canada to advocate for change and pressures politicians to take action to reduce red tape.

Long a champion of regulatory reform, CFIB estimates the burden of red tape costs Canadian businesses a whopping $30 billion each year in compliance costs alone.

“That’s a very conservative estimate, and it doesn’t even include the cost to individual Canadians,” says Laura Jones, CFIB's Vice-President of Western Canada.

The “alphabet soup of regulatory requirements” exists at all levels of government and involves a vast number of rules that businesses are expected to be aware of and fully comply with, says Jones.

“The issue of red tape really does range from your garden variety, fairly benign issues to those that are really outrageous and everything in between. And the problem is it’s like death by a thousand paper cuts—it all adds up to a whole lot of wasted time and energy and money.”

It also adds up to a lot of frustration and stress. In a CFIB survey, 70 percent of business owners said dealing with red tape added “significant” stress to their lives.

“It’s not just the rules themselves,” says Jones. “What happens when you phone and you get a busy signal, or you phone and you get put on hold, or you phone and you get two different answers from two different people about how you were supposed to comply with those rules and regulations? And that happens all too frequently at all levels of government.”

‘Total Nightmare’

A component of the awareness week is CFIB’s Red Tape Diaries—a compilation of stories from business owners detailing their experiences in trying to deal with the array of government rules and regulations.

The organization got the idea for the diaries after receiving a letter from a Saskatchewan farmer complaining that, among other onerous requirements, he has to fill out 400 forms for every container of crop bags he imports.

The bill of lading forms have to be completed in order to claim back the duty paid on the bags—a process described as a “total nightmare.”

“It takes a full-time employee three to five days to complete about six months worth of duty drawback claims,” wrote Greg Simpson, who exports pulse crops such as lentils to 70 countries worldwide.

“This generates a full box of paper that then has to be stored for seven years in case we are audited. Originally, the duty was applied to protect bag manufacturers in Canada, but after considerable research we find that there are no companies in Canada to produce these bags, so the duty is not protecting anything other than government jobs.”

Simpson also sent his letter to various mayors, premiers, and the Prime Minister’s Office.

“I’ve been personally raising this problem with government for over five years, with no solution in sight!” he wrote.

Progress in BC, Nova Scotia

But it’s not all bad news. Two provinces, British Columbia and Nova Scotia, have made strides in cutting down on red tape.

In aiming to reduce red tape by 20 percent, Nova Scotia’s baseline count on how much time business owners spend on paperwork was 615,000 hours a year. While a 20 percent reduction hasn’t yet been achieved, to date the amount of time businesses spend on red tape has gone down by 91,000 hours.

B.C., which began efforts to reduce red tape in 2001, has achieved a 40 percent reduction by cutting 160,000 regulatory requirements across the board. To keep the number from creeping up again, the province has set a target that with every new regulation that is introduced, another has to be cut.

“[B.C.] has shown a sticktoitiveness that is very unusual when it comes to government and regulation,” says Jones. “And that’s what’s critical, because governments often get excited about cutting red tape but their excitement only lasts for a very short period of time.”

According to CFIB, which has 107,000 members across a wide variety of sectors, business owners estimate that reducing rules and regulations by 25 percent across the country would result in a $7.5 billion annual stimulus package.

“It’s a pretty cheap way to stimulate the economy,” says Jones.

Red Tape Awareness Week, which includes a CFIB review of customer service at Canada Revenue Agency, is all about creating hope for business owners that the problem can be remedied, says Jones.

“It’s not until you talk to those people whose lives are directly, negatively impacted by it every day that you get a real sense that this is a problem that as Canadians we can’t ignore. We just can’t ignore it anymore.”