Red tape tales of woe from Canadian small business owners

January 25, 2013 | By | Reply More

Report reveals ridiculous government red tape stories

red tape

The red tape blues – small business owners have had to suffer rules, processes and government inefficiencies giving rise to unnecessary operating costs.

Beacon Staff Reporter

The Canadian Federation of Independent Business (CFIB) has released real-life stories of ridiculous government rules from across the country as part of Canada’s Red Tape Awareness Week.

For instance, business owners answer countless surveys from Statistics Canada. One day a small business owner in Ontario, who completed two surveys in the same week, got a third survey asking a series of questions about how she felt about filling out government forms.

In another case, one particularly diligent entrepreneur had to send a cheque for a government fee that was due Oct. 31, 2011.

Having had experience with red tape, he dated the cheque Oct. 12, 2011, and put it in the mail that day so that there would be no late fees. However, someone forgot to cash the cheque until Nov. 11, and then had no qualms sending a bill to him for late fees and interest.

The stories are countless and illustrate a $9 billion problem in Canada.


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The latest Canadian Red Tape Report from CFIB estimates that it costs Canadian businesses $31 billion per year to comply with regulations from all levels of government, an amount that business owners believe could be cut by 30 per cent, to the tune of $9 billion, without risking public health and safety.

“This is exactly what we mean by red tape,” CFIB executive vice-president Laura Jones said. “Not the regulations that protect Canadians, but those rules, processes and government inefficiencies that place undue cost on businesses without serving any purpose.”

“Small business owners feel like the government does not respect their time,” added Jones.

Jones goes on to explain that the time spent answering surveys or on hold waiting for information about regulatory requirements is time that could be spent with customers, making sales, or planning for the future of the business.

“Red tape is not just a nuisance,” said Jones. “It’s a hidden tax that holds back our economy. The stories we are sharing are only a small sampling of the headaches and waste that small businesses face every day.”

There are many examples of the type of red tape nightmares that exist in the small business owner’s world. Here is the tale of an owner of a small health services company in New Brunswick. This owner, like many others, takes on different jobs with his business, including payroll.


He recently got a letter from CRA, asking him to garnish an employee’s pay cheque. Because it was a small, one-time amount, the business owner contacted CRA to confirm that it was correct.

Usually employers are asked to garnish wages over months or years when an employee owes CRA thousands of dollars. The garnishee was no mistake, he was assurred. And the amount? $60.62. CRA was having trouble contacting the employee and decided to make it someone else’s problem.

A custom airplane engine manufacturer in Ontario had to severely cut back production due to a case of the taxman blues.

This small shop was audited three times in a 12-month span. Each audit took two days. At the end of the last audit, after six days of lost productivity and after disallowing a number of the business deductions, the CRA agent told the business owner, “You should be thankful we allowed you anything at all.”

The New Brunswick Department of Agriculture offers farmers a partial reimbursement of the costs of being certified organic.

The amount is the same for everyone, $385. If you are an organic farmer, you complete the same three-step application process every year. First, you apply to the department for certification, and then the department confirms your acceptance and asks you to sign and return the contract.

Once you get confirmation that the contract was received, you have to send a request for the reimbursement. Why three steps instead of one? Nobody knows.

In 2012, the Manitoba government thought it was simply giving businesses “a little haircut” by applying the PST to various personal services that had previously been exempt, including haircuts over $50.

This little haircut gave salon owners a big headache. Many had to update their accounting systems and cash registers to calculate tax on some transactions, but not on others.

Businesses had to figure out a way to comply with the new rules, register, update cash registers/systems, train staff and educate customers – all in a very short window.

You are only as good as your weakest link, and sometimes for small businesses, that link is somewhere in a government office.

Red tape sometimes transcends from the merely nonsensical to the patently ridiculous.

A “doggie daycare” and grooming business heard from its customers that there was significant demand for overnight boarding.

When the business owner applied for a license to operate after-hours, he was denied based on the fact that the business was in an industrial zone as opposed to an agricultural zone.

He tried to explain that since the business was in an industrial park, there were no residents nearby that could be disturbed. If he were to move to an agricultural zone, he would be too far to be convenient for his clients. Logic got him nowhere.

The owner of a business in Quebec was ordered to comply with a number of extra regulatory requirements specific to his industry and the location of his business.

The requirements included filling out a monthly report on the activities of his employees, and paying a number of additional payroll taxes.

These onerous requirements were originally intended to protect workers in certain industries from unfair treatment by their employers, but modern labour laws rendered the law obsolete. What might have been legitimate regulations in the 1930s has since turned into nothing but red tape.

The stories go on and on. And while Red Tape Awareness Week helps bring the issues to the forefront of attention, some business owners feel changes couldn’t come fast enough.

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Category: Canada

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