Senator Paul J. Massicotte

Red tape: a burden that is more detrimental than a new tax!

Paul Massicotte, Senator

39th out of 144: that’s how the World Economic Forum ranks Canada’s overly burdensome bureaucracy. With a mediocre score of 3.9/7, Canada is lagging behind a number of developed countries, including Switzerland, Sweden, the United Kingdom and New Zealand. In the current context of continuing economic gloom, this poor performance is not without consequences.

The growing number of cumbersome and sometimes contradictory rules, unnecessary delays and uneven customer-service quality are more than just frustrating; they are a real handicap for Canadian companies, especially small and medium enterprises. The heavy burden they face hampers their productivity, limits their capacity for growth and innovation and, ultimately, hinders their ability to invest and create jobs.

My background gives me a unique perspective.

On the one hand, I spent several decades in the private sector and am only too familiar with the petty annoyances created by many regulations businesses have to comply with. My parents ran the general store in a small village and—like many entrepreneurs today—did not have the resources or the skills required to “translate” the jargon needed to complete the various forms and comply with the regulations imposed by the government.

On the other hand, my twelve years of experience as a legislator in Ottawa have convinced me of the need for a strong regulatory framework, especially when it comes to safeguarding public goods, health, safety, and the environment, as well as to the overall proper conduct of a business’s affairs.

Although uncontrolled deregulation is clearly not an option, in my opinion, one issue is often overlooked when creating or maintaining regulations: hidden costs for businesses. According to a study by the Fraser Institute, $14 billion to $18 billion a year is spent to comply with the Canadian tax system. It is therefore not surprising that our fiscal framework is considered by various experts to be one of the 10 biggest obstacles to competitiveness. The Canadian Federation of Independent Business (CFIB) estimates that it costs our businesses more than $37 billion a year to comply with all government rules and paperwork—a 17% increase from 2012. According to the CFIB, the average employee spends more than one month each year dealing with regulations. For an average business, this represents 105 working days a year! Since these costs  -and the resulting higher prices- are then passed on to our society at large, it’s important to understand that the burden of our laws and regulations is often more harmful than a new tax or direct charges.

It is with this in mind that the Senate is currently considering the “Red Tape Reduction” Act. Its main objective is to enshrine in law the existing “one-for-one” rule setting out that each increase in the administrative burden on businesses must be offset with a corresponding decrease.

Although this Bill could be improved by including, for example, the sometimes convoluted rules of the Canada Revenue Agency, it is a step in the right direction and has my support in principle. However, it’s just that: a first step. It's one thing to tell entrepreneurs that their administrative burden will not increase, and another to actually reduce it.

Businesses are often criticized—and sometimes rightly so—for lobbying for benefits they should not have. However, it’s hard to find fault in their plea for simpler rules, clearer and better-explained administrative procedures, accessible and useful information, and government websites that a normal person can navigate. Is it too much to ask for shorter response and decision times or, even more down-to-earth, officials who actually answer the phone?

In all these areas, we must do better, much better. It’s not just a matter of introducing a new law; we need to change the way the federal government interacts with businesses in order to stimulate the economy in a way that doesn’t cost a lot. Our future well-being depends on such change in culture.