Businesses in Canada are contending with a complex regulatory landscape, which not only presents significant challenges to their daily operations, but also carries a total cost of $51 billion annually across all businesses, says the Canadian Federation of Independent Business in its annual Canada’s Red Tape Report: The cost of regulation to small business.
“This pressure is evident as nearly half (44%) of owners rank government regulation and paper burden as a top concern, second only to taxes and operational expenses such as labour and general costs These combined pressures make it increasingly difficult for businesses to remain financially viable, as they struggle to balance rising operating costs with the added burden of regulatory compliance. This financial strain also affects the cost of goods and services, ultimately impacting consumers. Moreover, these regulatory demands shape how entrepreneurs view the business climate and even influence the advice they would give to aspiring business owners. Only one in five (18%) would recommend starting a business right now,” said the report which was released on Monday.
“The weight of the regulatory burden ─ cited by 62% as a major deterrent to starting a business ─ extends beyond financial costs, consuming time and energy that is critical for growth and innovation. Instead of focusing on expansion or improving their offerings, many business owners find themselves bogged down by paperwork, permits, and a seemingly endless stream of compliance requirements.”
Read the full report: Canada’s Red Tape Report: The Cost of Regulation to Small Business.
Report highlights Impact of red tape
- In 2024, red tape accounted for 35% of business regulations. The share attributed to red tape decreases as business size increases.
- In 2024, the average business spent 735 hours (92 days) on regulation, 256 hours
(32 days) of which was spent on red tape. This marks a 58-hour (8.6%) increase from CFIB’s 2020 estimate of 677 hours. - 87% of small business owners think that excessive government regulation significantly reduces their business’s productivity and ability to grow. Financial cost of regulation
- The annual cost of regulation in 2024 reached $51.5 billion, with $17.9 billion attributed specifically to red tape. This marks a $5 billion (13.5%) increase from CFIB’s 2020 estimate of $45.4 billion.
- For smaller businesses, most of the regulation cost per employee is attributable to wage costs. Burden on smaller businesses
- Smaller businesses tend to spend more time complying with government regulation per employee than larger businesses.
- The annual cost of regulation per employee is higher for smaller businesses.
“Business owners lose an entire month’s worth of productivity to filling out lengthy or redundant forms, navigating mazes of government websites, and deciphering government jargon. That is crucial time that could be better spent on activities like training staff, planning business expansions, serving customers or even spending time with family,” said Marvin Cruz, CFIB director of research. “As governments at all levels look for solutions to Canada’s productivity problem, eliminating regulatory barriers and giving small business owners their time back needs to be a top priority.”
“Small business owners don’t get into business to be government compliance experts. Red tape discourages entrepreneurship, stagnates economic growth and overall, is a lose-lose situation for businesses and consumers alike. Eliminating unnecessary regulatory compliance would free up over 200 million hours across the economy for more productive activities,” said Laure-Anna Bomal, CFIB economist and report co-author. “Imagine what an entrepreneur could do if they got just over a month back. If Canada wants to improve its productivity and economic competitiveness, it must put a renewed focus on cutting red tape.”
Rising regulatory costs:
- In 2024, Canadian businesses faced $51.5 billion in regulatory costs—a 13.5% increase from 2020. Higher wages and professional fees, along with an increase in the time spent on compliance, are driving the rise in costs.
- In 2024, businesses with fewer than five employees paid $10,208 per employee in regulatory costs—over five times the cost for businesses with
100+ employees.
- Increasing compliance time: In 2024, business owners spent an average of 735 hours on regulatory compliance—up 8.6% from 677 hours in 2020. Of these, 256 hours were dedicated to red tape.
- In 2024, businesses with fewer than five employees spent 198 hours per employee on compliance, versus eight hours for those with 100+ employees.
- Reducing red tape: Business owners believe a 35% reduction in the regulatory burden—equivalent to $17.9 billion—could be achieved without compromising public interest. This reduction would also free up 268 million hours (about 137,000 full-time jobs) for more productive and growth-focused activities.
- Stress of compliance: 90% of small business owners report high stress from excessive regulation, often requiring long hours and harming work-life balance.
- Discouraging entrepreneurship: Due to the regulatory burden, 68% of owners would not recommend entrepreneurship to the next generation, posing a threat to innovation and economic growth.
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