Finance Committee on June 14th, 2006

[An hon. member]

You're a tough marker.

[Garth Whyte]

I am a tough marker: you should see their budget report card.

[Some hon. members]

Oh, oh!

[Garth Whyte]

Hopefully you'll give him some more minutes, as I steal some of his time, Mr. Chair, but I would also like to say that there was a time—when the GST was introduced—when the revenue agency wouldn't talk to us and we wouldn't talk to them. The relationship has improved immensely, where we now have a really good relationship, especially at the senior management levels. A lot of the challenges that we're pointing out here are also the challenges of the agency, which they know they have to deal with; I just want to make that pretty clear. But the CFIB's relationship with the revenue agency has improved immensely over the years.

[The Chair, Conservative, Brian Pallister]

Monsieur Bouchard, do you wish to continue?

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Yes, I have another question.

Figure 14 shows how compliance costs evolved for SMEs over the past five years. If I understand this correctly, things have gotten worse for SMEs. Thus, dealings with the Revenue Agency have gotten more expensive for SMEs.

Could you put a figure on the impact of this on the productivity of SMEs? Has this been measured? Is it negligible or is it a large figure?

[Garth Whyte]

Yes, it has been measured.

Thank you for that question. It's very good—and we didn't even talk beforehand.

In this report, we identified overall average costs for firms with let's say 12 to 15 employees. Those costs are about $18,000. Costs in a very small firm are up to $3,300 per employee. And this report was done in 2004.

We did a groundbreaking study, “Rated 'R': Prosperity Restricted by Red Tape”, which talked about the overall paper burden of all levels of government—federal, provincial, and municipal. We think this is a major issue that should be attacked by this minority government. When we did the study, our researchers had a 15-page formula, which we got them to distill down to a page, and we worked with Stats Canada and people in the Privy Council Office, who looked at our methodology and said it was fine. In just looking at business, we found that the overall paperwork and regulatory compliance burden was $33 billion a year.

What we handed out to you was one page from that report, which talked about the most burdensome federal regulations. If you look at the top four, they're all related to the CRA. There are two in particular: the GST-HST is the number one compliance burden issue, with 71% saying it's important and burdensome; and 60% say that payroll taxes, such as the CPP, QPP, and EI, are important; and 57% say income taxes are. When you layer on top of that the change in rules—the complexity of the rules, and not knowing what the rules are, and not getting interpretations—they really do hurt in terms of compliance costs. When the compliance costs and decisions are more difficult, they create uncertainty. When they create uncertainty, they hurt productivity and growth.

[The Chair, Conservative, Brian Pallister]

Mr. Whyte, we'll ask Mr. Turner to continue with his questions now.

Mr. Turner, seven minutes.

[Garth Turner, Conservative, Halton, ON]

Thank you, Mr. Whyte, for being here.

As a small-business owner, I know that the number one complaint of business is, as you correctly spelled out, compliance costs. So let's talk about that complaint for a couple of minutes.

First, I would like you to compare the burden on your members of federal versus provincial compliance costs—and I'm thinking particularly of worker safety, WSIB, the employer's health tax, and PST. Is the federal government any more burdensome than, for example, the Province of Ontario?

[Garth Whyte]

Well, it will take me some time to answer that, but I can answer it.

It depends. The federal government isn't in on labour standards issues, for example, which are big issues. If you ask about the most burdensome regulations, employment standards are number three, and workers compensation is number one, historically.

[Garth Turner, Conservative, Halton, ON]

I'm just thinking about compliance costs.

[Garth Whyte]

No, I'm talking about regulations and compliance costs.

[Garth Turner, Conservative, Halton, ON]

Right.

[Garth Whyte]

In Ontario, workers compensation is identified as number one. You can see that the harmonized sales tax was number two. So in some instances, the provincial government has more regulations and more compliance burdens.

As far as the federal government is concerned, the compliance costs for our members on the tax side, if you look at figure 14, the federal tax system is much more difficult. It's identified as increasing, but it's also more difficult than the provincial side.

[Garth Turner, Conservative, Halton, ON]

I just want to put that into context. So you're saying that the provincial government generally is equally burdensome right now.

So how does the federal government lower the cost of compliance? Do you have a top one or two or three recommendations for us on how specifically that could be reduced?

[Garth Whyte]

Yes, I do.

First-off, they've got to measure it; they've got to know what the overall compliance burden is. Secondly, you have to make it a priority to deal with it. Thirdly, you've got to report on it, and set targets on how to reduce it.

Then there are several areas they could look at. From our members' point of view, it's the GST-HST and the PIT that need to be looked at.

[Garth Turner, Conservative, Halton, ON]

Do you have specific recommendations for us on that?

[Garth Whyte]

We have a lot of specific recommendations. We've had four days' notice to prepare specific recommendations. We're hesitant to give you the specific recommendations, because they amount to what we call weed-whacking. You get one issue, and you knock it down; and up comes another one, and you knock it down.

We do have a couple I would mention. One would be the automobile expense. Every self-employed person has to do an automobile expense; they don't get a per kilometre mileage per diem, or anything like that. I would like one or two of you to just go up there and to try to find out where it is. It's called the automobile expense; well, it's not, but is actually called the motor vehicles expense. Then you go through it, and you've got to find out if it's joint ownership, or the type of vehicle that you need. Then you've got to go to the type of vehicle owned, and then you go into that. And then from there—

[Garth Turner, Conservative, Halton, ON]

Okay, I'm going to cut you off, because we have only seven minutes. There's no point in going through everything we can already get.

I'm just wondering if you are able to table specific recommendations—

[Garth Whyte]

Yes, we are.

[Garth Turner, Conservative, Halton, ON]

—because if you can't, then we can't have you back a year from now to judge any particular performance of the government. It's important for us, as an oversight committee, to know exactly the kinds of questions you want us to ask.

[Garth Whyte]

Well, first off, what's the extent of the problem? You can have specific examples, but you should know the total cost. And that can be done.

I'm chairing a committee right now with the government that was started by the Liberal Party and has been continued by the Conservative Party. There's a Stats Canada report that's going to come out that shows you can actually measure CRA compliance burden problems. It should be reported on yearly, and the targets should be set. Then this committee could say, well, what are you going to do next year, CRA?

And the reason it's not translated is that it's from B.C.; it's not our report. Everything we've provided is translated.

[Garth Turner, Conservative, Halton, ON]

Okay. Are you going to be providing this? Will you have a specific checklist for a specific number of recommendations?

Please, I'm not trying to be difficult—

[Garth Whyte]

No, no, you're right. We will.

[Garth Turner, Conservative, Halton, ON]

You have to be specific so we have something to actually gauge performance on. I hope you're able to table that. Obviously you can't do it now, but I hope you will.