On Wednesday, October 17th, Daniel Kelly, CEO of the Canadian Federation of Independent Business (CFIB) spoke to the annual conference of XBRL Canada in Ottawa. He spoke about the effect that government regulations are having on small business in Canada. This is important, since small business contributes very substantially to economic activity and, according to a 2010 study by Industry Canada, employs about 64% of the Canadian private sector workforce.
Mr Kelly pointed out that the areas of regulation that cause the most disruption are the GST, payroll taxes and income taxes. Of course, he does not suggest that these areas should be removed – that just wouldn’t happen – but he does suggest that the processes involved in regulating them could be substantially improved.
The government recognizes the importance of rationalizing the regulatory process as well. Earlier in the year, they received the report of the Red Tape Commission, a government initiative to look into the issues around red tape and how they could be addressed. Many interested parties made submissions to that Commission, including XBRL Canada and the Canadian Institute of Chartered Accountants (CICA).
These two organizations made the point that one important way to address the regulatory burden on business is through effective use of technology. They both pointed out that the use of structured data, such as eXtensible Business Reporting language (XBRL) can make it possible for the businesses to submit the data for the various filings they must comply with only once. In other words, instead of having to fill out the forms for GST, Income taxes, and Statscan, for example, which require some of the same information, they could simply submit the data points in structured form once, and then the departments could draw out what they need for their own purposes. This would not only allow the businesses to report only once, it would reduce the number of data points needing to be reported by eliminating the duplication. In the Netherlands, where this approach has been adopted, the number of data points has been reduced from 200,000 to 4800, a reduction of 98%. In Australia, the reduction is 71%.
This means substantial savings to business. And to government. In Australia, they estimate the savings can be as much as 800 million dollars per year. On an ongoing basis. Year after year.
Mr Kelly’s CFIB has carried out surveys on the cost of government regulation and determined that for the smallest businesses, the cost works out to $5800 per year per employee. This is a substantial amount of money and comes on top of the actual cost of those taxes. It is, in fact a hidden form of taxation.
If we could save even a third of that cost for 100,000 businesses, that amounts to an annual savings of 200 million per year. These are very, very rough numbers but they do show how the end result in savings could well be in the hundreds of millions, just as in the Netherlands and Australia.
The government is currently implementing the recommendations of the red tape commission. Hopefully they will listen to those who are pointing in the direction of technology, and good data management techniques in the form of structured data as a solution to the high regulatory burden currently being imposed on Canadian businesses.