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Andrew Mcgilligan Telegraph-Journal

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Small businesses are facing a crunch when it comes to complying with tax regulations.

While compliance is necessary, it has become a burden for many small businesses because the costs are high and the help from government is minimal.

Rick Demone knows the problems first-hand. As president of the Kennebecasis Valley Chamber of Commerce and owner of two small businesses, he deals with the tax burden on a daily basis.

"Small businesses collect sales tax for the provincial government – we're a collection company for the provincial government," Demone said. "It costs money for any business, but it's harder on a small business."

Lucie Charron is a senior economist with the Canadian Federation of Independent Businesses and co-author of a report entitled The Hidden Tax Burden: A Business Perspective on the Cost of Complying with Taxes. The report was released last month.

The paper looks at what are described as the hidden costs not considered by various levels of government when formulating tax policies. These costs include collecting and storing data for tax filings/audit requirements; making tax payments; completing tax forms; paying salaries related to tax paperwork; dealing with the Canada Revenue Agency (CRA) and provincial revenue departments; keeping current with changing tax legislation; and paying fees to tax consultants.

The CFIB estimates the annual cost for businesses to comply with tax obligations is $12.6 billion with 90 per cent, or $11.4 billion, coming from small and medium-sized businesses. The study also found the fewer employees a company has, the higher the tax compliance cost per employee. The study states that the tax compliance costs for very small firms, those with fewer than five employees, is $3,928 per employee while the cost for a firm with more than 500 employees is $212.

"What's happening is whether you're big or small, you still have the same amount of paperwork to put up with," Charron said. "Larger firms have specific accounting departments to handle this, while small ones don't."

The study conducted a survey of more than 8,200 business owners across the country and Charron said she heard the same problems over and over again.

"A firm we spoke with in Quebec, with two employees, said that he has the same amount of paperwork as if he had 50 employees," she said. "Another member said the paperwork was so intensive, one of his employees spends 60 per cent of their time doing paperwork for taxes.

"Effectively that person is working for the CRA at least half of their time."

Another cost not considered is the social burden on small business owners. The study found the stress of filing the paperwork and the time spent doing it outside of office hours meant small business owners had less time with their families.

While neither Charron nor Demone is saying small businesses shouldn't have to comply with tax regulations, they believe small businesses should get some special consideration.

"If you put all the small businesses together, that's a massive amount of not only sales tax dollars, but a massive amount of employment," Demone said.

Charron referred to small- and medium-sized businesses as the backbone of the Canadian economy and said they should be treated like a large corporation is. Take, for instance, that large businesses have employees of the CRA dedicated to answering their compliance questions while small businesses have to use the toll free line. Charron said often the information doesn't come in a timely manner, meaning the small business is late in complying and fined for the tardiness.

"One of the major recommendations of the report is by improving (CRA) customer service, you would reduce the tax burden," the senior economist said.

At a provincial level, Demone said the Liberal government should give some type of deduction or help to small businesses because they are the province's tax collectors.

"The Conservative government, under Bernard Lord, was rubbing the edges of it and getting a little involved, but the door has been shut by the new government," Demone said.

En français: Les propriétaires de petites entreprises déclarent qu'être conformes à la réglementation fiscale provinciale se révèle être un lourd fardeau financier.