Red Tape Sticks canadians for $85 Billion

Each Canadian household labelled for $11,929 in regulatory compliance costs

Release Date: 19 September 1996

VANCOUVER, B.C. >>> The cost of all federal, provincial, and municipal regulations reached $85.7 billion (12% of GDP) in 1993-94, according to the latest study by The Fraser Institute. These regulatory compliance costs impose a burden of $11,929 per family of four in Canada.

Regulatory Overkill: The Cost of Regulation in Canada also examines the regulatory cost faced by 20 firms drawn from different sectors of the economy, including oil and gas, mining, manufacturing, and services. Total regulatory costs increased an average of 22.3 percent annually from 1992 through 1994. "These figures indicate that the rhetoric of regulatory reform by successive governments at the federal and provincial levels has not been met with action," said Fazil Mihlar, policy analyst at the institute and author of the study.

The number of regulations affecting businesses in Canada has escalated dramatically over the past two decades, with over 100,000 federal and provincial regulations passed between 1975 and 1994. The federal and provincial governments passed, on average, 1,068 and 3,462 regulations respectively each year during this period. In real dollars, the administrative cost incurred by all three levels of government in dispensing regulation has risen from $2.9 billion in 1973-74 to $4.9 billion in 1993-94. This translates into a growth in real expenditures of 63 percent over the same period.

"One of the most important but overlooked challenges to Canada's economic competitiveness has come from unfair and unreasonable regulatory burdens imposed by all levels of government," added Mihlar. "Excessive government regulations are now a big obstacle to the creation of jobs. Regulation is akin to using 'stealth' technology to kill jobs."

Mr. Mihlar noted that the regulation cost estimate is rather conservative, since it measures only direct compliance costs. The burden associated with increasing regulatory costs also leads to lower productivity improvements, reduced competitiveness, higher prices for consumers, and heavier taxes to support the regulatory bureaucracy.

"Regulation is a hidden tax. For governments, regulation of business is a painless way of advancing various public policy concerns," Mihlar argued.

According to the author, governments directly impose socially desirable requirements on business as an inexpensive way of achieving public policy objectives. Although regulation appears to cost governments relatively less, and therefore does not seem to be a burden on taxpayers, the reality is that the public does not escape paying the full cost. "Every instance in which a government agency attempts to safeguard the environment, foster occupational health and safety, or promote product safety, it imposes a higher cost on firms. Canadian consumers then end up paying a higher price for everything they consume," added Mihlar.

RECOMMENDATIONS

The study's recommendations include:

• a moratorium on new regulations for three years;
• encouraging market-driven responses, i.e., voluntary standards and negotiated compliance;
• reviewing, amending, and/or eliminating existing regulations as recommended by committees at the provincial and federal levels;
• prioritizing regulations and not treating all risks as having equal magnitude;
• studying the economic impact of regulations;
• writing regulations that are simple and easy to understand;
• providing for a sunset clause in all regulations on a three year cycle; and
• minimizing inter-jurisdictional conflicts.

Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.

For further information contact:

Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca

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Last Modified: Wednesday, October 20, 1999.