Canada's Citizen Civil Service: the True Cost of Regulatory Compliance

I’ve already written about the internal costs regulatory compliance efforts impose on government operations. Just paying government workers to check the appropriate reporting boxes relating to the Canadian Gender Budgeting Act probably costs Canadians $50 million annually. And that’s just one piece of legislation.

But as it turns out, that’s nothing compared with the productivity that’s regularly misdirected to what essentially amounts to unpaid government work.

Consider how Canadian businesses are expected to spend some 100 hours/year managing their income tax and GST/HST filings, 70 hours dealing with payroll issues, 20 hours for record keeping relating to employment standards, 25 hours coming up with safety plans and other occupational health and safety documentation, 40 hours applying for foreign worker hiring, 50 hours for procurement of government contracts, and 50 hours dealing with food regulations. Etc.

Obviously, you won’t find any one company that faces all of those categories of compliance. But I think those are reasonable averages when you account for the fact that those hour-estimates are specific to small businesses. Larger companies will obviously spend a lot more time. Hopefully those two approximations will more or less cancel each other out statistically.

In total, my rough estimates suggest the average Canadian business annually spends 397 hours on government paperwork.¹ Given Statistics Canada data telling us that there are 1,023,359 private sector businesses in Canada, that’ll come to 406,273,523 work-hours nation-wide. And assuming the workers tasked with all that thankless labor are being paid $25/hour,² the annual cost of their time would be $10,156,838,075.

Similarly, each of Canada’s 34,009,470 adults should expect to spend around 15 hours a year filling out personal tax forms and (averaged over many years) applying for municipal permits of one kind or another. That’ll add up to 510,142,050 hours and - at $25/hour pay - the equivalent of $12,753,551,250 in lost labor productivity.

That’s $23 billion dollars of productivity drained annually from the economy through forcing private citizens to perform unpaid government work.

Now this isn’t to say that we should simply eliminate all regulations, or even all regulatory reporting requirements. Complex societies need some regulation and associated data inputs.

But there’s an awful lot of fat that could be trimmed without disrupting the system. And most of that fat can be found in an insanely complex Tax Act.

I just filed my business taxes so, as it turns out, these are things I’m thinking about myself. Just imagine how many millions of hours could be saved by a simplified business tax process that involved:

• One corporate tax rate for all businesses regardless of size, ownership, and passive investment income

• Immediate expensing instead of deprecation schedules

• Fewer corporate tax credits (if the government wants to subsidize R&D, it could do so through an explicit expenditure program)

• Simplified interest deductions

• Combined (income tax, CPP, and EI) payroll remittances and reporting

That’s only one possible approach to reform out of may alternatives people have suggested. The point is that the law we have doesn’t need to be the law we’re stuck with forever. And the tens of billions of dollars regularly wasted on unnecessary paperwork aren’t necessarily lost forever either.

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Here’s some more reading for you:

1. The 2025 report of the Canadian Federation of Independent Businesses actually estimated the average Canadian business spent 735 hours a year on regulatory compliance. But I’ll stick with my lower numbers for this post.

2. Of course, when it comes to small businesses, a lot of that work will actually be done by external accountants who likely bill at rates somewhat higher than $25/hour.