What is ‘red tape’?
This term refers to excessive regulation that is considered redundant or bureaucratic that hinders action or decision making in businesses by the government. Governments rely on making regulations to achieve policy objectives and to appeal to the public’s interest, while also being in alignment with our globalizing economy. However, the distribution of these regulations often produce direct costs towards businesses in order to comply with its requirements. Thus, this is increasing the amount of burden upon businesses, especially small businesses. Due to recent analyzation, it is argued that these compliance costs include “hidden tax” on business competitiveness. Despite the government’s more recent efforts to simplify and streamline interactions with businesses, red tape is still a problem. From the Survey of Regulatory Compliance Costs, here are a few statistical examples:
- This data represents Canadian private sector businesses with fewer than 500 employees, generating between $30,000 and $50 million in annual revenue
- Over 30 million hours are spent annually by internal staff to comply with these obligations
- Businesses having fewer than 20 employees are disproportionately affected by compliance:
- A small business with 1-4 employees becomes subject to at least 7 times more costs per employee than its larger counterparts
- The majority of businesses use an external service to assist in preparing their personal (T1) or corporate (T2) income tax returns, due to the complexity of complying with these requirements
It was not until more recently that these costs of compliance were even measured within Canada. Its burden was often overlooked, and still can be today. Thus it’s important to always examine your compliance costs and note how red tape is affecting your business!
For more information, visit: https://www.ic.gc.ca
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