Industry Committee on Feb. 5th, 2019

[Dan Albas]

For a small business that is trying to service multiple different types of clientele and different classes, do you see their going to be subject to a whole bunch of regulatory red tape? Will they have to open up a binder to see where they apply the tax and where they don't?

[Ryan Greer]

From a pure cost perspective, even if there's a rebate for small businesses based on carbon pricing, the clean fuel standard is going to increase transportation costs—the regulatory side of transportation costs across Canada. Even for low-emitting small businesses, almost all of them rely on the transportation system in one way or another and are going to have their costs increase through the clean fuel standard.

Certainly it's something that we and our small business members are watching closely.

[Dan Albas]

It's not just the price, because that's a different question here. Do you feel that the regulatory requirements may also push some activities away—because there are increased costs that have to be passed on to someone—and you might see people deciding to take a flight from the United States rather than from Canada? Again, it's carbon leakage, but by regulatory means.

Do you think that's an issue?

[Ryan Greer]

Certainly it's one risk. We will be strongly encouraging the government—along with carbon price regime that it's proposing—to show us how regulatory burn will be reduced to offset some of those tax costs. It's certainly something we'll be watching for and pushing.

[Dan Albas]

I'd like to go to the CFIB. Ms. Jones and Ms. Pohlmann, thank you for your presentation and your ongoing work on this.

Another area where we've seen a lot of resentment from the small business community is, obviously, in response to the changes to the Income Tax Act, particularly to Canadian-controlled private corporations. Again, these rules were implemented with very little consultation. Many small businesses told me that they felt the federal government was out to get them.

This is the first year with these new rules in place. Are your members finding it more complicated to be able to comply? Again, small businesses face the higher proportionality of reporting requirements. What are your members saying?

[Corinne Pohlmann]

In particular, it's the tax on split income changes that has had the biggest impact in terms of the regulatory burden. There are now two levels of tests that you have to go through to prove whether a family member is working in your business. There's now a bright-line test that you have to go through first. If you pass that, then you're good. If you don't pass that, you have to go through a reasonableness test, which has always kind of been there. The addition is now this bright-line test, which pretty much everybody who employs family members has to figure out a way to prove to the CRA, such as by producing time sheets to show that your spouse is actually working in the business legitimately. That is the type of paperwork burden that's increased as a result of the tax on split income changes. The actual tax itself may not have as broad an impact. It's the extra paperwork that's really been adding to the costs of small businesses when it comes to—

[Dan Albas]

The extra paperwork.... Because again, to apply for that particular program, you have to submit paperwork showing that you've made.... Do you think there are going to be some cases where people just don't have the paperwork for something they could legitimately apply for, but choose not to do so just because of the regulatory burden that goes along with that?

[Corinne Pohlmann]

There's always that potential, for sure. I think our bigger fear is whether our members even know what type of paperwork is going to be required. We're trying to work with CRA right now to get that information out as broadly as possible. I don't think we're really going to know until we're about two years down the road, once audits of those businesses start to happen and we see whether or not the materials they're producing are being used by CRA as legitimate enough. I think it's going to take a few years to really understand the repercussions of this and see how it's going to play out in the real world.

[Dan Albas]

I'll ask Mr. Greer and CFIB the same question. Because of things like a national carbon tax as well as the small business changes, do you feel that the regulatory burden has negatively impacted your members, from a red tape perspective?

[Corinne Pohlmann]

Yes, absolutely. That's one of the reasons the Income Tax Act is currently not included as one of the areas that comes under the one-for-one rule or is not included as part of the count. Both these measures, as far as I understand, are under the Income Tax Act more than anything else. Yes, it continues to grow, but there's no control over that particular act in terms of its impact on small business.

[The Chair, Liberal, Dan Ruimy]

Respond very briefly, please.

[Ryan Greer]

I would just add— and I think this goes to something that Laura said, which is really important—that there are specific initiatives, and there will always be regulatory and legislative initiatives that, by virtue of their necessity, will increase red tape or regulatory burden. Having no complete, accurate measure of what that burden is and being able to fully track where we're at and how we can reduce those numbers makes it difficult, because it gets better sometimes and it gets worse sometimes. We don't have a complete picture of how bad it actually is.

[The Chair, Liberal, Dan Ruimy]

Thank you.

Mr. Masse, you have seven minutes.

[Brian Masse, NDP, Windsor West, ON]

These are good presentations and good documents.

First, I've got a simple question. Why do we need regulations?

[Ryan Greer]

As I alluded to in my remarks, there are any number of reasons—many of which benefit all Canadians and businesses alike—including market integrity, and health and safety protections.

[Laura Jones]

I would echo that. I think there are a number of really important regulations. In fact, small businesses would say that about 70% of the rules we have are necessary. They have no issue paying taxes and filling out the forms to pay their taxes, for example. You start to have the challenge when the forms get overly complex or the rules around paying taxes get cumbersome for no good reason.

[Brian Masse, NDP, Windsor West, ON]

The general thought, though, is that there's not opposition to having regulations. The problem is that we need enforcement, because some people choose not to follow the law and fair practices. There has to be some enforcement of health, safety, labour and employment laws and the necessary documents for employment insurance, for example, and other things like that. That is when it comes in place.

In the document you have here, there's $36 billion in costs. Where did that number come from? What's the background for that annual $36 billion?

[Laura Jones]

That comes from a survey of our small business members that we do, when we ask them the time it takes to comply: the time their staff spends in complying, and the money they spend on things like accountants to comply with the rules. It's an estimate of the cost of regulation to Canadian business. That's not Canadians overall, but Canadian businesses of all sizes. It's a basement, a very conservative estimate of the cost. Any time we had to make an assumption, we made a conservative assumption, and there are things that are not included in our estimate.

[Brian Masse, NDP, Windsor West, ON]

Was the methodology created by yourselves or by a university or an institution?

[Laura Jones]

No, that methodology was created in house at CFIB, with the help of our chief economist.

[Brian Masse, NDP, Windsor West, ON]

You have some really good recommendations, and the first one is, “Measure the regulatory burden”. I think that's a really good point. If you're going to get the low-hanging fruit or whatever, it always seems this way. At any rate, where do we need to better measure what we have in front of us currently? The chamber has a good document too. They mention the 2015 report as well. So we have some numbers floating around, but are these scattered or not consistent?

[Laura Jones]

They're scattered, not consistent and not comprehensive enough, and I would include our measure in that: it is not comprehensive enough. It's an attempt to put a price on it. And some good cost-benefit analyses have been done on specific regulations, but we need a measure of everything in the system, and that doesn't exist. I would suggest that it be a simple measure, not a perfect measure. It won't tell you everything you need to know, but that's why we're suggesting a regulatory requirement measure.

[Brian Masse, NDP, Windsor West, ON]

So you're looking for a benchmark that we could look at every year, and maybe have it in different categories, and measure how we're getting along. Is that correct?

[Laura Jones]

Yes. The Province of Manitoba is now state of the art with respect to this kind of measurement. British Columbia has measures and is looking at regulatory requirements. They can tell you how many they have by department, and you can see whether they've gone up or down in any given year. As with taxes, if there's an increase in the regulatory requirement load in a particular area, we can ask what benefits we are getting from that. It may not be a bad thing to increase the load, but we want to be able to ask those challenging questions about what benefits we might be getting.

[Brian Masse, NDP, Windsor West, ON]

I think that would be helpful, because I know that terminology like “red tape” and “regulations” is just like grabbing at clouds, whereas if we get some really good measurables.... I think it's important that the industries are coming to us to say that they'd like to have that measurement, because then you can get to more specifics. I know you have a couple of case examples in your documents here, but it would be nice to have them broken out by industry.