Thank you. Good afternoon, and thank you for the opportunity to be here.
As you may know, the CFIB is a not-for-profit organization representing the interests of over 97,000 small and medium-sized businesses across Canada. Our members come from all sectors of the economy and all regions of Canada.
It is important to distinguish between regulations that are justified and excessive regulations, which we know of as red tape. Many regulations are integral and needed in our system, such as those that protect the health and safety of Canadians. On the other hand, red tape is excessive government regulations that are unfair, overly costly, poorly designed or contradictory. Red tape can also include unnecessary delays and poor government customer service. Red tape undermines productivity, lowers wages and harms the entrepreneurial spirit.
CFIB first estimated the cost of regulation to Canadian businesses in 2005. Our most recent measure, from 2020, found that the total cost of regulation on businesses from all levels of government was $38.8 billion. Of this, businesses identified 28%, or $10.8 billion, as excessive regulatory burden.
More importantly, the regulatory burden hits small businesses the hardest. The cost of government regulation for businesses with fewer than five employees was five times higher than the cost for businesses with 100 or more employees. This is because larger businesses can spread the regulatory burden across a greater number of employees and often have in-house resources devoted to compliance.
Beyond the burden of time and money, excessive regulation creates frustration. It might take two hours to understand confusing language on a form and get an answer from a government helpline and then another two hours for your blood pressure to come down. It's no surprise that 87% of small business owners say that excessive regulation adds significant stress to their lives and that 63% would not advise their children to start a business, given the current burden of regulation in Canada.
Further, 81% agree that excessive government regulation reduces their business's productivity and ability to grow. If regulatory costs on their business were reduced, small businesses would use that extra time and money to increase wages, invest in new equipment and dedicate more time to employee training—all of which are key to growing productivity.
We have identified a number of specific examples of excessive regulations at the federal level that need attention, including things like the disability tax credit forms, T4 dental care and UHT reporting, CBSA classifications, airline fitness for travel forms, interprovincial trade barriers like the movement of food across borders and many more. I'm happy to elaborate on any of those if needed.
We can try to fix every specific regulatory issue that arises, but this will never fix the overall regulatory burden, so a broader approach is also needed. Over the years, we have learned that there are three essential ingredients to effective regulatory modernization.
The first is political leadership. Effective and sustained regulatory reform must be driven from the top, with a political commitment from the leadership that is echoed through all departments and agencies.
The second is regulatory accountability. Regulation deserves the same level of transparency and debate as taxing and spending. Real regulatory accountability requires ongoing measurement and external oversight. To do this, governments need to look at the regulatory burden found not only in regulations but also in legislation, policies and forms. Additionally, governments should measure that burden from all government departments, agencies and delegated authorities to obtain a comprehensive measure and then publicly report on that measure on a regular basis.
The third is constraints on regulators. Perhaps the most effective element in achieving regulatory modernization is imposing constraints on the regulators themselves. Implementing a cap on regulatory costs can ensure that the burden of regulations is kept in check. It also forces regulators to consider alternatives and trade-offs, and to prioritize those regulations that are most important. A regulatory cap could take the form of a reduction target or a target for no net increase in regulatory activity.
The current federal one-for-one rule—whereby one regulation of equal burden must be eliminated for every new one introduced—is a good example of this. However, the federal approach is too narrow and too complicated.
We would also suggest that government continue to work on a few other regulatory modernization best practices.
First of all, make plain language a priority. It is reasonable to expect government to provide consistent, timely advice in plain language.
Another is to introduce a virtual suggestion box, which would allow citizens to flag red tape examples for government.
Next, keep compliance flexible and provide basic guidelines for what constitutes compliance. Regulations really work best when they are outcome-based rather than prescriptive. This allows businesses to find the most cost-effective way to comply with the rules. However, smaller businesses do not typically have the resources to explore different options for the least costly way to comply. For those businesses, having basic guidelines regarding what constitutes compliance is extremely important.
The fourth is to improve online options. Being able to do things online can save a lot of time, but it's also important that online options provide clear pathways to a live person when needed.
The last one is to improve the accountability of regulators by instituting measures like reverse onus guidelines. Often there is little or no flexibility for business owners when it comes to meeting their compliance obligations. However, regulators usually have no specific timelines imposed on them for when decisions will be made or paperwork will be approved. These imbalances should be remedied so that regulators also have deadlines and suffer consequences when deadlines are not met or if advice proves inaccurate or inconsistent.
Thanks for the opportunity to share our thoughts, and I look forward to your questions.