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Red tape is an unnecessary drag on Canada's economic growth Add to ...

Red tape – regulation run amok – is a hidden tax that damages the economy and costs us all opportunities, but is too often absent from our collective radar.

Five years ago, the Canadian Federation of Independent Business (CFIB) launched its first annual Red Tape Awareness Week to change that. Our campaign has raised red tape’s media profile and encouraged political announcements. Now, two other forces – mediocre economic growth and the impending ‘demographic tsunami’ of retiring Boomers – are highlighting the pitfalls of excessive regulation for all of us.

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When Boomers entered the labour force, Canada was a different place. There was general concern that there wouldn’t be enough jobs to accommodate them all. At the same time, incomes were rising, which led to a corresponding increase in demand for safety and environmental protection. This created a climate where the proliferation of rules, forms and government process seemed reasonable, at least to some.

In today’s Canada, however, concern is shifting from the challenge of not enough jobs to the challenge of not enough people to fill the jobs. Looking out five to ten years, both the public and private sectors are worried about being short-staffed as Boomers take their leave. In this new climate, it would be more fruitful to have clear rules that can be administered with minimal bureaucracy – a dream come true for many of Canada’s small business owners.

But can this dream become a reality? For decades, regulators have seen it as their job to add rules. Tax rules, for example, have become so complicated that even the regulators don’t always understand them. We frequently get complaints from business owners who have called the Canada Revenue Agency (CRA) to clarify and confirm advice only to be given a different answer to the same question they asked previously.

For example, a new on-line Record of Employment (ROE) form – which has to be completed for employees when they leave a company – was supposed to simplify what is considered very cumbersome process for employers; instead regulators took the opportunity to ask additional questions on the on-line form.

Will reducing, simplifying and clarifying rules become the new normal? That will depend on both the vision and commitment of Canada’s political leadership, and of the people who elect them.

As a country, we must confront the challenge of regulation head-on, because Canada needs to encourage entrepreneurship – not discourage it. After all, entrepreneurs are responsible for turning their ideas into products and services, building companies, creating jobs and generating the incomes that sustain our communities. But if too much red tape gums up creativity, then wealth, not to mention job creation, falter.

Like frogs in boiling water, many of today’s entrepreneurs have acclimatized to the rules, but what does Canada’s next crop of business owners think about the amount of government-imposed paperwork they would have to navigate?

Anecdotally, we hear many small business owners giving the following advice to their offspring about following in their footsteps: Don’t do it. Running a business today is a very different proposition than it was three or four decades ago. There’s are whole new classes of rules that didn’t exist decades ago in areas as diverse as bullying, privacy and recycling. Meanwhile, rules that did exist, like those around tax compliance, have become far more complex. But there are no more hours in the day.

Each rule on its own can seem innocuous, but the cumulative impact of having to hire a lawyer to help you design a privacy policy, filling out a mandatory 100 question Statistics Canada survey, keeping track of sign by-law changes, managing overtime within employment standards, and keeping up with the paperwork associated with sales and income tax compliance – to name just a few of the rules business owners deal with – can feel like death by a thousand paper cuts.

More evidence that we have a serious problem comes from a recent CFIB survey of small business owners. One-third of business owners say if they had known how difficult it would be to comply with government rules, they might not have gone into business. Eighty per cent say regulatory compliance adds significant stress to thseir lives.

Spending hours trying to understand a government form or years navigating a process that should take weeks is a wasteful, unnecessary drag on productivity and economic growth. Prime Minister Stephen Harper, who has been championing red tape reduction since 2011, calls red tape “a silent killer of jobs.”

There is a perfect storm brewing: too many years of unchecked regulatory growth, a slow economy with no obvious low-hanging fruit to boost growth, and the demographic reality of retiring Boomers. Weathering the storm will require shifting our attitudes towards regulation both inside and outside of government.

We must get away from thinking that more regulatory complexity keeps us safer, and recognize that regulatory complexity is starting to erode our standard of living, which has its own risks. Effective protection can come from clear rules administered in a timely way.

A good example of the kind of thinking we are looking for comes from Passport Canada. They have reduced wait times for submitting passport applications from an average of 98 minutes in 2007 to an average of 24 minutes in 2009, simplified the passport renewal forms, and reduced the frequency with which Canadians have to endure the renewal process by introducing a ten year passport (previously passports had to be renewed every five years). This saves both citizens and regulators valuable time.

Another example comes from CRA, they recently adopted our recommendation to provide business owners with advice in writing and to respect that advice (and not penalize business owners) even if it is wrong. These are both huge culture shifts and promising indications that bigger changes are possible.

Our country stands at a red tape crossroads, but there are some reasons to be optimistic: as we speak, the federal government is implementing an ambitious Red Tape Action Plan. Leadership at the provincial level continues from British Columbia, where red tape reduction is considered an important enough priority that it was in every cabinet minister’s mandate letter from Premier Christy Clark after the election. Finally, forces from outside government will continue to push for change.

CFIB is one of those forces and is known for its tenacity in advocating for necessary policy change. It has no intention of abandoning its campaign to raise awareness and encourage governments to cut red tape and unleash entrepreneurship.

Laura Jones is executive vice president of the Canadian Federation of Independent Business. To find out more about Red Tape Awareness Week visit www.cfib.ca.

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