The amount of time spent complying with regulations and the cost of red tape comes with an astronomical price for Canadian businesses.
The Canadian Federation of Independent Business began its 16th annual Red Tape Awareness Week on Monday by issuing the seventh edition of the Red Tape Report – a study that measures the financial impact of government regulation.
The report highlighted that time spent on red tape has increased by 35% since 2020 for small businesses, rising from 189 hours in 2020 to 256 in 2024. Red tape accounted for 35% of the 256 hours small businesses spent on regulatory compliance. The report separated regulations into two categories: justified regulation and excessive regulation, or red tape.
The federation said that justified regulations add real value to businesses with social benefits that outweigh the costs. Conversely, red tape encompasses excessive government regulations.
Canadian businesses faced compliance costs totalling $51.5 billion in 2024, up 13.5% from $45.4 billion in 2020. Of this total, $17.9 billion was attributed to red tape, or 35%, a 41% rise from $12.7 billion in 2020.
“Higher wages and professional fees, along with an increase in time spent on compliance, are driving the rise in costs,” said the federation in its press release.
The federation said eliminating red tape would free up 268 million hours for business owners, which is equivalent to almost 137,000 full-time jobs.
“The extra hours could be used to plan business expansions, serve customers, train staff, or spend more time with family. It would undoubtedly have a positive impact on productivity across Canada,” reads the report.
Small businesses bear a disproportionately higher regulatory burden than larger firms.
Businesses with fewer than five employees spent $10,208 per employee on regulatory compliance in 2024—over seven times the $1,374 spent by businesses with 100 or more employees.
Smaller firms spent 198 hours per employee on compliance, nearly 25 times more than the eight hours per employee spent by businesses with 100 employees or more.
Almost nine in ten, 87%, of small business owners said that excessive government regulations are reducing their business’ productivity and ability to grow. Nine in ten reported high stress from excessive regulations that have harmed their work-life balance.
Business owners said that reducing red tape would help them expand operations, hire more employees, increase wages, and improve work-life balance, thereby contributing to greater productivity and economic growth.
The Canadian Federation of Independent Business said this was necessary because Canada’s labour productivity growth has been trailing most OECD countries. It is projected to have the lowest GDP per capita growth among advanced economies between 2020 and 2060.
The regulatory burden is also dampening motivation. Almost seven in ten, 68%, of business owners would not recommend entrepreneurship in Canada to the next generation.
The vast majority of businesses are not confident in the government’s ability to reduce red tape. Only 6% of business owners are confident that the federal government will reduce red tape.
The confidence level varied by province. Confidence was lowest in British Columbia, where only 4% of business owners trusted their provincial government to reduce red tape. Alberta stood out with 39% expressing confidence, the highest in the country.
The Canadian Federation of Independent Business provided ten recommendations for effective regulatory reform in its report. The ten-point plan includes measuring the regulatory burden, staying accountable to the public, prioritizing plain and simple language, and making regulatory accountability a political priority.
The federation’s director of research, Marvin Cruz, said at a media embargo that governments are generally receptive to suggestions such as these as they are looking for solutions.
However, Executive Vice President of Advocacy for the Canadian Federation of Independent Business, Corinne Pohlmann, said that Canada’s competitiveness is extra important right now due to President Donald Trump’s proposed tariffs. She said he would be implementing legislation in the United States to lower regulation, making Canada comparatively even less competitive.
The federation’s Red Tape Awareness Week will continue with further releases and awards each day.
