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ARCHIVED - Why Cutting Red Tape Matters

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The term "red tape" is associated with the time and resources spent by business to demonstrate compliance with Government regulatory requirements. It is also a major irritant for Canadian business owners- with more than 70 per cent of them reporting that red tape adds significant stress to their lives and two thirds saying that it significantly reduces their productivity.

Reducing red tape is good for everyone. It helps our businesses compete and creates jobs for Canadians. It represents a low-cost way to stimulate the economy and boost productivity as Canada emerges from the global recession.

That's why the Government has made this commitment- to ensure that regulatory compliance ceases to burden Canadian businesses by tying them up in red tape.

How much does red tape really cost?

Red tape is tangling up small businesses and restricting our nation's prosperity. While regulatory compliance costs are difficult to assess, :

According to a 2010 study by the Canadian Federation of Independent Businesses, red tape from all levels of government costs the business sector in Canada about $30.5 billion or 1.9 per cent of Canada's Gross Domestic Product each year.

  • Industry Canada estimated that small business owners spend an estimated $1.1 billion a year to comply with only 12 of the key federal, provincial and municipal information obligations.
  • Also, according to the Canadian Federation of Independent Businesses, the private sector spends up to $20 for every dollar spent in Government administration costs for regulatory programs.

How does red tape affect small business?

Studies by Industry Canada show that the smaller the business, the greater the impact of red tape. It costs:

  • small business over 30 million hours a year to comply with some or all of 12 of the federal, provincial and municipal information obligations; and
  • firms with less than five employees about seven times more per worker than businesses with 20 or more employees.

These numbers are especially important in a country like Canada, where 98 per cent of firms have less than 100 employees.

Why are we targeting red tape?

Canadian business has told us that red tape is a big problem. Red tape restricts innovation, productivity and competitiveness.

By reducing the compliance burden, the Government is streamlining regulatory requirements and reducing costs for Canadian business. By reducing red tape, we are enabling better regulations to:

  • create a more predictable business environment;
  • protect the health, safety, security and environment of Canadians;
  • strengthen international trade;
  • free up capital to invest in business, not in process;
  • allow small businesses to compete and grow; and
  • give Canada a competitive edge in the global market.

How can I learn more?

The Discussion Paper, Cutting Red Tape… Freeing Business to Grow, provides background on the key areas where red tape is impeding business.

On October 1, 2012 the Government of Canada released the Red Tape Reduction Action Plan report. This action plan details the systemic regulatory reforms the government is putting in place to address the Commission's report.

Links to:

Discussion Paper

Overview of Major Regulatory Modernization Initiatives

Fact Sheets on Federally Regulated Sectors