Reflections
Letter from the President and CEO
Easing the Regulatory Burden
FROM:
JAN-FEB 2007 ISSUE
Recently CGA-Canada completed a major collaborative research project with the Association of Chartered Certified Accountants (ACCA) in the U.K. on regulatory issues facing small and
medium-sized enterprises (SMEs).
In Canada, there’s been increasing concern about
over-regulation — specifically, what it means for smaller business entities. Regulatory compliance can place a large burden on small firms while having little actual relevance to their operations.
CGA-Canada’s portion of the joint research project focused on understanding business reaction to regulation with the goal of bringing improvements to the business climate for the SME sector.
We asked publicly listed SMEs and CGA practitioners in Canada about their views on regulation. We wanted to know about the support role accountants play, as well as issues related to regulatory complexity, quantity, change, timing, duplication, and inequity.
SMEs said that with the exception of securities regulation, regulatory requirements around taxation, environmental protection, human resources, payroll, and employment are fair. Securities regulations were the greatest concern for publicly traded SMEs.
In Canada, the overall problem lies not with individual regulatory requirements, but with the cumulative effects of regulation. And not surprisingly, the research showed that accountants play a significant role in helping SMEs manage their regulatory obligations.
We also asked other Canadian stakeholders what factors contributed to this regulatory burden. They told us the three tiers of government in Canada make little effort to coordinate regulatory activities. This leads to regulations that are redundant, incompatible, and confusing. Regulators are also
“risk-averse” trying to “bulletproof” regulations, resulting in unnecessary complexity.
In addition, new regulations are often created without appropriate consideration for the businesses they impact. Regulators fail to effectively educate businesses on the regulations that apply to them. They also fail to verify whether the regulations meet their original goals. With this in mind, here are our key recommendations:
- Make regulatory reform a priority at all levels of government.
- Designate a senior official at the ministerial level to the deregulation portfolio.
- Establish accountability by measuring regulation, setting reduction targets, and reporting to the public on progress achieved.
- Assess the impacts of new regulation, specifically the costs/benefits on business.
- Limit the impact of regulation by addressing the unique needs of SMEs given they have fewer resources to manage new requirements than their large counterparts.
- Create a one-stop online interface to inform businesses about new and existing regulatory requirements.
- Create a common securities regulator, or, at least, augment efforts to harmonize requirements across provincial jurisdictions.
To us the issue is clear: the cumulative burden of regulation on SMEs in Canada is an issue needing urgent attention. It’s also clear that productivity and growth can be improved by reducing the regulatory burden. So why not do it now?
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