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CFIB’s Dan Kelly: The cost of following thousands of regulations is a ‘hidden tax.’ (Tim Fraser for The Globe and Mail)
CFIB’s Dan Kelly: The cost of following thousands of regulations is a ‘hidden tax.’ (Tim Fraser for The Globe and Mail)

Canada Competes

Who’s regulating the regulators? Small businesses want to know Add to ...

This piece is one of a series of high-profile Canadians commenting on the Canadian Chamber of Commerce's Top 10 reasons Canadian competitiveness is dropping.

Talk to just about any small-business owner in this country, says Dan Kelly, president and CEO of the Canadian Federation of Independent Business, and you’re bound to hear some griping about the number of hours they spend complying with rules and regulations laid down by federal, provincial and municipal governments, along with thousands of departments, agencies and authorities.

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For decades, members of the CFIB, which represents 109,000 small-business owners nationwide, have named red tape as their No. 2 challenge, right behind the total tax burden.

To shed light on the problem, the CFIB holds Red Tape Awareness Week each January, which culminates with the Golden Scissors Award, bestowed on someone who has demonstrated “leadership and courage” in cutting red tape (this year’s winner was Gail Shea, the federal Minister of National Revenue).

We talked to Mr. Kelly about the impact of excessive rules and regulations on Canada’s productivity.

Tell me about the red-tape problem we have in this country.

Governments have two major powers: They have the power to spend and tax, and they have the power to pass laws, rules and regulations. We have pretty good measures when it comes to spending and taxing. But when it comes to red tape, there are virtually no measures to outline how significant an impact rules and regulations have on entrepreneurs. For 41 years, we’ve asked our members about the top issues affecting them when it comes to government. The total tax burden has historically been No. 1. But No. 2 has been regulation and paperwork, and that has been the case for forever. It is a significant holdback on business.

Who gets hit the worst?

It is smaller businesses that get hit the worst, and that’s not a surprise. If you’re a big company, the regulatory burden is spread across thousands of employees. If you’re a small business with five employees, you may have the same regulatory burden as the larger firm, but you, as a business owner, are implementing the rules yourself, and you’re spreading the burden over five employees.

So the cost of regulation is much, much more significant – in fact, it’s five times more significant for the smallest firms. The burden of regulation and red tape costs the economy $31-billion per year in Canada. And that’s a conservative estimate. I should say that no business in Canada is suggesting that there be no regulation. But there are tons and tons of things that are duplicative. We get that governments need to regulate and, on an ongoing basis, pass new rules and regulations. But there are tens of thousands of civil service and policy shops dreaming up new ways of regulating business, and virtually no competing forces saying this rule isn’t necessary – let’s scrap this one.

When you say it’s costing us $31-billion in economic terms, how is that?

It’s the business owners’ time to implement the regulations, consultants that they have to pay, or staff they have to hire to complete the government forms or paperwork. We call it a hidden tax.

If they didn’t have to spend all that time and money dealing with red tape, where would we be?

We would have a significantly more robust and productive business community.

A business owner might spend more time talking about opening a second location or a new bid they’re going to make on a contract in Europe, as opposed to poring over their HST remittances at their kitchen table at two in the morning in their underwear. It’s a sap on time for entrepreneurs, because every minute they’re spending on regulatory excess is a minute they’re not spending on growing or improving their business, hiring the right staff person, serving a customer.

Is there one red-tape tale that really sticks in your mind?

We’ve got loads. One is from the days when I was vice-president of Western Canada for CFIB, based in Calgary. It was a high-end men’s clothing store, and they used to give their customers a cup of coffee while they browsed for a suit. The regional health authority came in and told them they had to send all their employees to a training program to ensure they knew the safest way to handle the coffee and mugs. They had to install an industrial dishwasher for $5,000 to clean the mugs. And they were required to pay an annual fee to show that the business and the employees had passed food services certification.

There was also a video store, back when those things existed, that served popcorn to customers. And the only portable piece of equipment was the scoop that was used to serve the popcorn. Again, they had to install an industrial dishwasher to wash the scoop, even though the business owner went to the restaurant next door and got a signed letter saying that they would be permitted to wash their scoop in the restaurant’s industrial dishwasher every day. That wasn’t good enough for the health authority. It’s stuff like that that drives businesses crazy.

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