Statistics Canada today released its first-ever survey on regulatory compliance costs.

It found that small- and medium-sized businesses in five industrial sectors spent an estimated $1.53 billion last year filling out forms to comply with 11 key government information obligations – everything from filing income tax forms to paying federal and provincial sales taxes. Businesses in these sectors account for approximately 40% of the revenue for small- and medium-sized businesses across all industrial sectors.

According to the survey, 61% or $943 million was outsourced to external service providers such as accountants, income tax specialists and payroll service providers to comply with their reporting obligations. The balance was the cost incurred by businesses when compliance was managed internally. Internal costs were based on the time and salaries of individuals within a business who are responsible for compliance.

The survey focuses on administrative compliance requirements such as completing forms and reporting information. It did not attempt to measure other regulatory burden components such as capital costs incurred to comply with regulations. Survey coverage was limited to five industrial sectors, 11 regulations, and small- and medium-sized establishments with fewer than 500 employees and revenues of between $30,000 and $50 million.

The five sectors were: manufacturing; retail; professional, scientific and technical services; accommodation and food services; and other services. The 11 regulations it looked at were: payroll remittances, record of employment, T4 summary/individual T4s, workers’ compensation remittances and claims, T1/T2 income tax filing, federal/provincial sales taxes, corporate tax instalments, corporate registration, mandatory Statistics Canada surveys, municipal operating licences and permits and provincial licences and permits.

Income tax filing accounted for 41%, or $627 million, of total compliance costs, followed by federal/provincial sales tax filing, which represented 17%, or $268 million. Payroll remittances accounted for 14%.

The survey also found that as business size increases, total compliance cost increases, yet compliance costs per employee drop. This can be partly explained by the fact that although compliance costs rise as employment increases, larger businesses tend to have trained staff dedicated to compliance or the compliance is outsourced to service providers. The survey also showed that as businesses become larger in terms of employment, they outsource a larger percentage of their compliance costs.

Other findings show significant regional variations in average annual compliance costs. These ranged from a high of $3,100 per establishment in Ontario to a low of $2,300 in Atlantic Canada. There was a wide variation among industrial sectors as well. Compliance costs averaged $4,400 per establishment in the manufacturing sector, just under $2,800 in retail trade, and just under $2,600 in scientific and technical services. The average size of establishments within a region or industrial sector will have an impact on compliance costs.

This is the first Statistics Canada survey on regulatory compliance costs. The results are intended to help determine whether future efficiency measures introduced by government are reducing the compliance burden facing businesses.