Canadian red tape costs remain high, U.S. costs now higher

While small businesses on both sides of the border report major red tape barriers, Canada’s entrepreneurs now spend considerably less on regulatory compliance than their U.S. counterparts, according to a report from the Canadian Federation of Independent Business in partnership with the Small Business Roundtable in the U.S. and supported by Intuit Canada.

The smallest Canadian businesses spend $7,310 (CAD) per employee each year complying with government rules, which is roughly the same as previous years, suggests the report.

In the U.S., similar sized businesses have seen costs increase to $11,904 (CAD) per employee, up considerably from the last estimate in 2013. The estimates mark a turnaround from CFIB’s 2013 comparison where costs were higher in Canada compared to the U.S.

It’s important to note that these estimates do not include the cost of COVID-19 compliance, which is significant according to three quarters of business owners in each country.

In Canada, the smallest businesses spend almost 10 times more on a per employee basis on regulatory compliance than the largest businesses.

“Businesses have been hammered by the cost of COVID-19 over the past two years,” said Laura Jones, CFIB executive vice-president. “While governments have shown more regulatory agility during the pandemic, this needs to be their default setting moving forward. It’s critical to our recovery.”

The report is the only apples-to-apples comparison of regulatory costs to businesses in Canada and the U.S. Other key findings of the report include:

• Red tape costs Canadian businesses $11.3-billion (CAD) annually. It costs American businesses $167.5-billion (CAD).
• The average Canadian business spends approximately 677 hours – the equivalent of 85 days – each year on regulatory compliance. The average American business spends 889 hours, the equivalent of 111 days.
• In Canada, the smallest businesses spend almost 10 times more on a per employee basis on regulatory compliance than the largest businesses. The smallest American businesses spend 14 times more time per employee than their largest counterparts.
• 87 per cent of Canadian business owners and 84 per cent of American business owners report excessive government regulations add significant stress to their lives.
• Given the current burden of regulation, 63 per cent of Canadian business owners and 46 per cent of American business owners would not advise their children to start a business.

The Regulatory Costs in Canada and the United States: A Small Business Perspective report was conducted in partnership with the Small Business Roundtable and generously sponsored by Intuit Canada.