/Red tape and small business

Red tape and small business

From Shaman’s Rock

By Jim Poling Sr.

There’s much talk lately about the need to reduce red tape. We live in a country in which people are swimming in it, just trying to keep afloat.

The latest red tape report from the Canadian Federation of Independent Business (CFIB) says that small businesses estimate that dealing with red tape costs $11 billion a year.

The report also says that regulation from our three levels of government – federal, provincial and municipal – cost $38.8 billion in 2020. The total amount of time spent on complying with government regulations by all Canadian businesses was 731 million hours, the equivalent of 375,000 full-time jobs.

CFIB says the smallest businesses are hurt by red tape more than larger ones. The smallest businesses pay roughly $7,000 a year per employee to comply with government regulations. Larger businesses, CFIB reports, pay $1,237 annually per employee. So, being able to spread regulatory costs over more staff give the larger business a competitive advantage over the smaller ones.

Red tape is defined as excessive bureaucracy that slows getting things done and creates unreasonable costs to people and business.

We’ve all seen or read about examples: for instance some authorities requiring kids to have a business licence for lemonade stands. Or, the frustration and time lost trying to navigate government websites that are long, and complicated. 

And, most of us have seen those Taylor Swift-like lineups at Service Canada locations where people try to do business with the federal government, often for passports.  In 2022 people reported bringing lawn chairs and sleeping bags for day-long waits in Service Canada lineups.

The City of Toronto once decided that people wanting to obtain a new business licence could do so only on paper, in person and at one location.

Thankfully, reducing red tape is being recognized by governments and many jurisdictions are taking action to eliminate costly and time-demanding processes.

The federal government passed a Red Tape Reduction Action in 2015. The law requires that for every new regulation introduced, one existing regulation must be eliminated. That means every new regulation imposing an administration burden on business must be offset by a decrease in administrative burden.

The feds have reviewed the one-for-one rule and say it is working. However the review, published on a Government of Canada website, is roughly 3,000 words long, hopelessly bureaucratic and very difficult to understand.

A new study into why fewer Canadians are starting new businesses estimates there are 100,000 fewer business owners than there were 20 years ago. Only 1.3 individuals out of 1,000 started a business in 2022, compared with three out of 1,000 in 2020.

There are increasing calls to free small businesses from red tape and tax burdens. CFIB says that small businesses estimate that the burden of regulations could be reduced by 28 per cent without harming any public interests, which regulations are designed to protect.

A strong campaigner for removing the roadblocks that prevent creation of more small businesses is Frank Stronach, founder of Magna International Inc., one of Canada’s largest companies.

Stronach says that as of 2021 Canadian small businesses employed more than eight million people, close to 70 per cent of our total private sector workforce.

“We’ve placed so many obstacles in the way of small businesses and burdened them with countless regulations and rules that it’s no wonder so many small business don’t survive more than a few years after opening their doors,” he has written in a number of publications, including the Minden Times.

Governments are concerned about small business and have brought in numerous support programs to counter rules and regulations that are impairing small business growth. But Stronach says the way to help small business is to get out of the way: slash all the red tape and let small businesses take off and soar.

Sounds like a good idea. Most governments do seem concerned about lack of small business growth. 

Concern is not enough. We need real action from all forms of government. Red tape is a sickness that is weakening our economy and the only way to cure it is to eliminate it.