GREEN: Time to finally cut red tape and liberate businesses in Canada

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Ever since Donald Trump overturned the tables of the regulators in America’s administrative state, many Canadians have finally recognized Canada also has a major excessive regulatory problem of its own.

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Indeed, Canada’s economy is festooned with red tape. Businesses are forced to comply with seemingly endless paperwork and reporting requirements pertaining to every dimension of how they run their businesses, regardless of whether or not those regulations actually protect the public. This budget season, governments across Canada should address this red-tape problem, which is strangling businesses from coast to coast.

For example, according to the latest “Red Tape Report” from the Canadian Federation of Independent Business (CFIB), in 2024 the average small-business owner lost the equivalent of 32 business days due to red tape. Moreover, the combined cost of regulation to businesses from all three levels of government in Canada reached $51.5 billion including $18 billion due to red tape. And businesses of all sizes spent 768 million hours on regulatory compliance — the equivalent of nearly 394,000 full-time jobs.

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More alarmingly, Canada’s red tape burden has grown significantly. According to the report, in 2020 it cost Canadian businesses $45.4 billion to comply with regulations (from all levels of government) compared to $51.5 billion in 2024 — an increase of 13.5%.

And business-owners dedicated 677 hours (85 business days) on average to regulatory compliance in 2020 compared to 735 hours (92 business days) in 2024 — an increase of 8.6%. Of the 735 hours spent on regulation, 256 hours (32 business days) were spent on red tape — up markedly from 189 hours in 2020. CFIB suggests the “complexity and scope of regulations, are contributing to a growing compliance burden.” No doubt.

In addition to the scope, scale and time-consumption of red tape, there’s a matter of cost. According to the report, in 2024 (as was the case in previous years) small businesses face significantly higher annual regulatory costs per employee compared to large businesses. In 2024, for businesses with fewer than five employees, government regulation cost $10,208 per employee — more than five times higher than the cost for businesses with 100 or more employees ($1,374). Consequently, the annual regulation cost per employee increased across all business sizes between 2020 and 2024 (after adjusting for inflation), except for large businesses (100-plus employees) where the cost per employee remained relatively unchanged.

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Finally, the report notes the recent growth of red tape has been uneven across the provinces. Nova Scotia, whose regulatory red-tape costs grew by 22.8% from 2020 to 2024, led the pack followed closely by Saskatchewan (21.5%) and P.E.I. (21%). Conversely, Manitoba (7%), Alberta (7.5%) and Newfoundland and Labrador (9.1%) were the slowest growing red-tape cost provinces from 2020 to 2024.

In its report, the CFIB’s reform recommendations, which include appointing a designated minister to oversee regulatory reform, echo elements of the reform movement currently underway in the U.S. Although the CFIB stops short of recommending a cap on what regulatory agencies can spend in a given year or specifying how many old regulations must be terminated before a new one is created.

Still, even if the CFIB’s recommendation are somewhat tepid compared to Trump’s regulatory-reform tsunami, the next federal government — whoever that may be — and the provinces would do well to follow CFIB’s advice and create a competitive regulatory environment. It’s a good “Made in Canada” place to start.

Kenneth Green is a senior fellow at the Fraser Institute.

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