Red Tape Awareness Week: A Threat to Small Businesses

Red Tape Awareness Week is an initiative by the CFIBIn a time of stagnant GDP growth, Canadian small businesses continue to be a driving force for Canada’s economy. In 2009, over a quarter of Canada’s total GDP came from companies with less than 50 employees on the company payroll. Small businesses aren’t so small after all – almost 50 per cent of Canadians work for them!

The truth is, small businesses need all the help they can get – over half fail within the first three years in Canada, according to Industry Canada. A recent report by the Canadian Federation of Independent Businesses (CFIB) released in time for Red Tape Awareness Week states Canadian small businesses are at a distinct disadvantage to their neighbours south of the border. Canadian businesses with fewer than 50 employees pay 45 per cent more than similar U.S. businesses, costing employers nearly $6,000 per employee each year. In total, these regulations cost Canadian businesses over $30 billion each year.

 What is Red Tape?

Red tape is any form of excessive government regulation or paperwork that impedes the operation of business. It is a term that has been passed down from generation to generation, used by many centuries ago by great authors like Charles Dickens. Red tape comes in many forms – following rules and regulations with little benefit, needless wait time, and an endless supply of forms and paperwork requiring government licenses and approvals. Needless to say, red tape can be a real pain in the neck for small businesses.

 Canada Lags Behind U.S. in Productivity

Canadian businesses in almost every industry come second to their U.S. counterparts in productivity. Improving efficiency is vital to the Canadian economy. Although Canadian firms only spend two-thirds of what U.S. firms spent on machinery and equipment, unnecessary government red is also a major drain on productivity. Sixty eight per cent of Canadian businesses say their productivity is reduced due to red tape. Yet cutting government red tape is a simple and less costly solution to Canada’s productivity woes – snipping these processes by 30 per cent would provide a $9 billion dollar injection into the Canadian economy. This could be done easily with no adverse effects.

 80 Per Cent of Job Growth Due to Small Businesses

If you’re looking for a job, a small business could be your best bet. According to a government study, 80 per cent of new jobs came from employers with fewer than 50 employees. Canadians are starting their own small businesses in droves – in the last two years alone, over a million Canadians have opened their doors. This is encouraging news – but what isn’t so encouraging is that had these same business owners known about the red tape, nearly a third of businesses owners wouldn’t have opened their doors in the first place.

 Top Issues Facing Small Businesses

Red tape is the second most pressing issue for Canadian businesses.  Do you have any idea which issue is first? No one likes dealing with the taxman – coming in at number one is total tax burden. With corporate tax rates stalled in Ontario until our government gets its deficit woes under control, government red tape is the easiest and least costly solution. It would help create jobs and revive our stagnating workplace.

 

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One thought on “Red Tape Awareness Week: A Threat to Small Businesses

  1. It’s interesting how things can be seen so differently. You think it’s a bad thing that Canadian small businesses pay their employees more than they do in the States. I on the other hand, see it as Canadians being more prosperous than our American counterparts. And what would help our economy and revive stagnating businesses? More red tape? I do get that red tape can impede businesses. I guess I’m just missing the others.

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