Measuring the Small Business Compliance Burden

Objective:

As part of its goal to reduce the compliance burden on small businesses, the Canada Revenue Agency (CRA) published Measuring the Small Business Compliance Burden, Benchmark Report (Benchmark Report) in 2009. The Benchmark Report established a baseline for monitoring progress in reducing the compliance burden. In 2011, the CRA followed up the Benchmark Report with the Measuring Small Business Compliance Burden – Status Report (Status Report). The Status Report measures the change in the compliance burden that the CRA imposes on small business.It shows these changes in terms of money and time, and also calculates the impact—both qualitative and quantitative—of the services the CRA provides that contribute to reducing the compliance burden. Undertaking this analysis has contributed to an enhanced CRA-wide consciousness of the compliance burden. The benchmark results allow for an evaluation of the CRA’s continued efforts in reducing the small business compliance burden.

The Status Report explains the CRA’s actions taken since the benchmarks were established and analyzes internal and external factors that could have led to the results achieved.

Target Audience:

Canadian public and businesses

Start Date and End Date:

The CRA Action Task Force on Small Business Issues was mandated in 2006 to identify CRA administrative practices that imposed the greatest burden on small businesses. The Task Force was also charged with developing solutions to reduce burden and with introducing a systemic approach to burden reduction across the agency. Through the development of the Performance Measurement Framework for Compliance Burden Reduction, the CRA adopted measures that relate to the time and money expended by small businesses to comply with their tax obligations.

In 2009, the Benchmark Report wasdeveloped to establish the baseline for measuring future changes in the compliance burden faced by small businesses.

As a follow-up to the Benchmark Report, in 2011 the Status Report was published outlining the changes that have occurred in the small business compliance burden from 2005 to 2008 and the CRA-wide approach to burden reduction. The Status Report is produced every three years to correspond with the release of the Survey of Regulatory Compliance Costs, which is commissioned by Industry Canada and conducted by Statistics Canada.

Responsible Department or Agency:

Canada Revenue Agency (CRA)

Partners:

Statistics Canada and Industry Canada (cross-cutting initiative)

Summary:

Key findings

There was a decline in the average annual cost per establishment to comply with the legislative requirements in 2008 compared with 2005. During the same time period, the rate of satisfaction with CRA services and service channels remained relatively consistent.

1. Direct measures—costs in time and money

The average annual time spent per establishment to comply with the CRA’s requirements dropped from 17.7 hours in 2005 to 15.0 hours in 2008.
The average annual cost per establishment decreased from $1,825.39 to $1,724.10.
The cost decreased slightly for small businesses with 1 to 99 employees and decreased significantly for those with 100 to 499 employees; and
The cost of service providers (i.e., tax practitioners) remained the largest component of compliance costs for small businesses.

2. Indirect measures—complexity of the compliance process and quantity and quality of CRA services for taxpayers

In 2008, 23.2 per cent of total taxpayer errors were attributable to incorrectly filed returns, compared with 26.8 per cent in 2006.
Of Canadians who contacted the CRA in 2008, 79 per cent were satisfied with the overall service received, the same result as in 2006.
In 2008, 81 per cent of small businesses and 84 per cent of intermediaries said that they were satisfied with the CRA website, compared with 74 per cent of small businesses and 80 per cent of intermediaries in 2006.
Many actions were undertaken by the CRA to reduce the compliance burden, such as changing thresholds, reducing filing frequencies, simplifying forms and enhancing electronic services. The Status Report evaluated results to enable and provide a focus for future steps in the CRA’s ongoing process to reduce compliance burden.

For additional information, please contact:

Media enquiries:

Noël Carisse
Media Relations
Canada Revenue Agency
Telephone: 613-952-9184

Other Enquiries:

Eric Miller,
Director, Corporate Performance and Measurement
Strategic Integration Branch
Canada Revenue Agency
Telephone: 613-957-8544
Email: eric.miller@cra-arc.gc.ca