From the Fraser Institute

By Kenneth P. Green

Canada has a regulation problem. Our economy is over-regulated and the regulatory load is growing. To reverse this trend, we need a deregulation agenda that will cut unnecessary red tape and government bloat, to free up the Canadian economy.

According to the latest “Red Tape” report from the Canadian Federation of Independent Business, government regulations cost Canadian businesses a staggering $38.8 billion in 2020. Together, businesses spent 731 million hours on regulatory compliance—that’s equal to nearly 375,000 fulltime jobs. Canada’s smallest businesses bear a disproportionately high burden of the cost, paying up to five times more for regulatory compliance per-employee than larger businesses. The smallest businesses pay $7,023 per employee annually to comply with government regulation while larger businesses pay $1,237 per employee.

Of course, the Trudeau government has enacted a vast swath of new regulations on large sectors of Canada’s economy—particularly the energy sector—in a quest to make Canada a “net-zero” greenhouse gas (GHG) emitter by 2050 (which means either eliminating fossil fuel generation or offsetting emissions with activities such as planting trees).

For example, the government (via Bill C-69) introduced subjective criteria—including the “gender implications” of projects—into the evaluation process of energy projects. It established EV mandates requiring all new cars be electric vehicles by 2035. And the costs of the government’s new “Clean Electricity Regulations,” to purportedly reduce the use of fossil fuels in generating electricity, remain unknown, although provinces (including Alberta) that rely more on fossil fuels to generate electricity will surely be hardest hit.

Meanwhile in the United States, Donald Trump plans to put Elon Musk and Vivek Ramaswamy in charge of the new Department of Government Efficiency (DOGE), which will act as a presidential advisory commission (not an official government department) for the second Trump administration.

“A drastic reduction in federal regulations provides sound industrial logic for mass head-count reductions across the federal bureaucracy,” the two wrote recently in the Wall Street Journal. “DOGE intends to work with embedded appointees in agencies to identify the minimum number of employees required at an agency for it to perform its constitutionally permissible and statutorily mandated functions. The number of federal employees to cut should be at least proportionate to the number of federal regulations that are nullified: Not only are fewer employees required to enforce fewer regulations, but the agency would produce fewer regulations once its scope of authority is properly limited.”

If Musk and Ramaswamy achieve these goals, the U.S. could leap far ahead of Canada in terms of regulatory efficiency, making Canada’s economy even less competitive than it is today.

That would be bad news for Canadians who are already falling behind. Between 2000 and 2023, Canada’s GDP per person (an indicator of incomes and living standards) lagged far behind the average among G7 countries. Business investment is also lagging. Between 2014 and 2021, business investment per worker (inflation-adjusted, excluding residential construction) in Canada decreased by $3,676 (to $14,687) while it increased by $3,418 (to $26,751) per worker in the U.S. And over-regulation is partly to blame.

For 2025, Canada needs a deregulatory agenda similar to DOGE that will allow Canadian workers and businesses to recover and thrive. And we know it can be done. During a deregulatory effort in British Columbia, which included a minister of deregulation appointed by the provincial government in 2001, there was a 37 per cent reduction in regulatory requirements in the province by 2004. The federal government should learn from B.C.’s success at slashing red tape, and reduce the burden of regulation across the entire Canadian economy.

From the Fraser Institute

By Jake Fuss and Grady Munro

Ottawa’s proposed increase to the effective capital gains tax rate will result in Canada having among the highest—and least competitive—top capital gains tax rates in the industrialized world, finds a new study released today by the Fraser Institute, an independent, non-partisan, Canadian public policy think-tank.

“The evidence is clear—taxing capital gains deters investment, particularly smaller and start-up firms, which in turn slows productivity gains and innovation, all things Canada needs right now to raise living standards for workers,” said Jake Fuss, director of fiscal studies at the Fraser Institute and co-author of Canada’s Waning Competitiveness on Capital Gains Taxes.

The study finds that by increasing the inclusion rate, the federal government has made Canada less competitive compared to other advanced countries. At a 50 per cent inclusion rate, Canada’s top capital gains tax rate ranked between 17th and 23rd (depending on the province) out of 37 high-income developed countries in the Organization for Economic Co-operation and Development (OECD).

Raising the inclusion rate to 66.7 per cent means Canada’s top capital gains tax rate would be among the highest and least competitive (between 8th and 13th highest, depending on the province).

The study notes that if Canada’s capital gains inclusion rate were lowered to 33.3 per cent, Canada would be among the most competitive in the OECD, ranking 30th and 31st, again, depending on the province.

“Instead of raising taxes on capital gains, policymakers should consider reducing taxes as a way of attracting much-needed investment, and reversing Canada’s current economic slump,” Fuss said.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute