Vol. 149, No. 26 — June 27, 2015
Red Tape Reduction Regulations
Red Tape Reduction Act
Treasury Board of Canada Secretariat
(This statement is not part of the Regulations.)
The Red Tape Reduction Act (the “Act”) fulfilled the Government of Canada’s commitment to permanently control the growth of administrative burden costs that federal regulations impose on businesses by enshrining the “One-for-One” Rule in law. The Act contemplates that a number of important operational elements be set out in regulation, including the methodology for calculating administrative burden, the two-year reconciliation period, the exemptions that the Treasury Board may grant, and the content of the annual report. Without these fundamental mechanics, the objectives of the Act cannot be fully realized.
In response to business community concerns over the growth of red tape from federal regulations, the Government of Canada established the Red Tape Reduction Commission (the “Commission”) in January 2011 to identify, and recommend options to address, irritants to business that stem from federal regulatory requirements. One of the recommendations of the Commission was that the Government introduce legislation to adopt a “One-for-One” Rule that would eliminate an existing regulation every time a new one is introduced.
In October 2012, the Government responded to the Commission’s recommendations by releasing the Red Tape Reduction Action Plan, and accepted the recommendation to introduce legislation for the “One-for-One” Rule. In the October 2013 Speech from the Throne, the Government reaffirmed its commitment to legislate the “One-for-One” Rule.
The “One-for-One” Rule requires regulatory changes that increase administrative burden costs to be offset with equal reductions in administrative burden. In addition, ministers are required to remove an existing regulation when they introduce a new one that imposes administrative burden costs on business.
The “One-for-One” Rule has been in effect through policy under the Cabinet Directive on Regulatory Management since April 1, 2012. As of May 20, 2015, the implementation of the Rule, and the resulting regulatory amendments and repeals of federal regulations required by the Rule, resulted in an estimated net reduction in administrative burden costs carried by business of $32 million. This represents an estimated reduction of almost 750 000 hours annually in time spent by businesses dealing with regulatory red tape. The Act, which received royal assent on April 23, 2015, established the “One-for-One” Rule in legislation, as well as annual public reporting requirements regarding the Government’s implementation of the Rule.
The objective of the proposed Red Tape Reduction Regulations (the “proposed Regulations”) is to support the implementation of the Red Tape Reduction Act, by prescribing in law key operational elements of the “One-for-One” Rule that are critical to its ongoing, effective operations and that support transparency and Government accountability for the implementation of the Rule.
The proposed Regulations establish the following operational elements of the “One-for-One” Rule, along with reporting requirements that support the clarity, transparency and accountability of the Rule. The proposed Regulations maintain the implementation of the Rule that has existed in policy since 2012.
- The formula for calculating the administrative burden cost of a regulation is the sum of the annual cost of each administrative activity within the first 10 years after the regulation is registered (cost = employee time × wage × number of businesses). This methodology is based on the internationally recognized Standard Cost Model, with adjustments to “discount” (see footnote 1) future costs, to present estimates in constant 2012 Canadian dollars, and to convert the results into annualized estimates.
- Regulatory departments have 24 months, after a regulation imposing a new administrative burden is registered, to comply with the requirements of the “One-for-One” Rule as set out in the Act.
- Prior reductions in administrative burden costs and prior regulatory repeals accumulated since April 1, 2012, can be used to satisfy the requirements of the “One-for-One” Rule.
Regulations can be amended or repealed before the regulation that imposes administrative burden is made.
- The Treasury Board may exempt regulations from the “One-for-One” Rule under the following categories or circumstances:
- If the regulation is related to tax or tax administration.
- If Her Majesty the Queen in Right of Canada has no discretion regarding the requirements that must be included in the regulation due to international or legal obligations, including the imposition of international sanctions or the implementation of Supreme Court of Canada decisions.
- In emergency, unique or exceptional circumstances, including where compliance with the Rule would compromise public health, public safety or the Canadian economy.
- The annual report would need to contain the following information:
- A summary of administrative burden cost increases and decreases resulting from regulatory changes captured by the Rule within the 12-month period ending on March 31 of the year in which the report is made public; and
- The number of regulations amended or repealed through regulatory changes captured by the Rule within the 12-month period ending on March 31 of the year in which the report is made public.
In addition to the above-mentioned information that is specified in the proposed Regulations, the annual report will also include reporting on the Government’s implementation of other regulatory reform measures under the Red Tape Reduction Action Plan.
Calculating administrative burden
The proposed Regulations prescribe two formulas to be used to calculate administrative burden costs.
The second formula in the proposed Regulations is derived from the Standard Cost Model used to calculate the cost of an administrative activity.
C × D × E ÷ 1.07F ÷ G
- “C” is the wage paid to the employee of the business conducting the administrative activity converted to 2012 dollars based on Consumer Price Index data.
- “D” is the number of hours it takes the employee to complete the administrative activity.
- “E” is the number of businesses subject to the administrative activity in the regulation.
The formula above also incorporates calculations to apply a discount rate, so that the time value of money is accounted for in all dollar values over a 10-year period.
- “1.07” represents the 7% discount rate being applied.
- “F” is the specific period in time for which the administrative cost is being calculated.
- “G” is the frequency per year that the administrative cost is borne.
This calculation is repeated and totalled for each period of time over the 10-year period of analysis that an administrative activity is required by business. The total for all activities required by a regulation results in the lump sum present value of the administrative burden cost of the regulation, which is then inputted into the first formula in order to arrive at an estimated annual administrative burden cost.
Using the formula above produces a result for the variable “A,” the administrative activity cost, which is then used in the first formula in the proposed Regulations.
A × 0.142378 ÷ 1.07B − 2012
This formula is used to calculate the overall annualized administrative burden cost over a 10-year period.
- “A” is the administrative activity cost derived from the second formula in the proposed Regulations.
- “0.142378” is an accounting factor that results from the assumption of a 10-year assessment period and a discount rate of 7%. This factor translates the lump sum administrative burden cost into an annuity cost spread evenly over the 10-year period of assessment.
- Dividing by 1.07B − 2012, where “B” is the year in which the regulation subject to the Rule is registered, provides a further discounting factor to set the present value annuity cost of the administrative burden to a base year of 2012 so that all regulations subject to the “One-for-One” Rule are measured consistently.
The final result of this formula gives the total annual cost of administrative burden for the given administrative activity.
Each of the formulas above must be repeated for every individual administrative activity in the regulation subject to the “One-for-One” Rule. These results are then added together to give the overall annual administrative burden cost imposed on businesses by the regulation as measured from a base year of 2012.
It should be noted that the above-mentioned discount rate and 2012 base year will be periodically reviewed to ensure that they remain relevant and accurate for the purposes of offsetting increases in administrative burden costs with comparable amounts of reductions in costs.
The “One-for-One” Rule does not apply to the proposed Regulations, as they would not impose any administrative burden on businesses. The proposed Regulations would only apply to federal government departments.
Small business lens
The small business lens does not apply to the proposed Regulations, as there are no costs to small business.
The Red Tape Reduction Commission undertook, in 2011, broad, cross-country consultations with businesses and Canadians to identify irritants created by federal regulatory requirements. Members of the business community expressed concern that without an effective way to permanently control the growth of the administrative burden stemming from regulations, the burden would steadily grow and directly affect the cost of doing business in Canada. The Act and the proposed Regulations respond to this concern.
Federal departments and agencies were consulted on the application and procedural mechanics of the “One-for-One” Rule during the development of “One-for-One” policy guidance, in 2012. The views expressed at that time were taken into consideration and integrated where possible into the final guidance document, Controlling Administrative Burden That Regulations Impose on Business: Guide for the “One-for-One” Rule, distributed to departments in 2012 and published on the Treasury Board of Canada Secretariat (TBS) Web site in March 2013.
Following three years of implementation under policy, the Act was considered by Parliament, and received royal assent on April 23, 2015. The proposed Regulations would largely implement what is in the existing policy guidance, which has been in place since 2012 and is publicly available on the Treasury Board Web site. In addition, the Treasury Board Secretariat has published two Annual Scorecard Reports, which report publicly on the implementation of the Rule and on other red tape reduction reforms. No additional consultations have been undertaken with departments, as the Act and the proposed Regulations would maintain the implementation of the Rule that departments have been following since 2012.
The proposed Regulations would support the Government’s commitment to controlling the administrative burden that federal regulations impose on businesses, as articulated in the Act. The Act moved the “One-for-One” Rule from policy to law, and the proposed Regulations are necessary to give the weight of law to certain details of how the Rule works.
The proposed Regulations establish how administrative burden is to be calculated, the time period during which regulators must offset any new burden that they introduce, and what Canadians can expect the Government to report in its annual public report on the Rule. Given that the “One-for-One” Rule has already been implemented under the Cabinet Directive on Regulatory Management, there would be no incremental cost incurred by Government.
Implementation, enforcement and service standards
The “One-for-One” Rule has been a Government of Canada policy since 2012, with guidance on the application of the Rule available to federal regulators and the public since April of that year. The proposed Regulations would not require the implementation of new requirements by federal regulatory departments. TBS would continue to administer the Rule, promote accountability via annual public reporting, and support the implementation of the Rule via written TBS guidance to federal departments and agencies along with central TBS challenge of draft regulatory proposals. TBS anticipates the development and release of updated policy guidance within six months of the Regulations coming into effect, to reflect the evolution of the “One-for-One” Rule under the Act. The release of the first annual report on the “One-for-One” Rule would be required by December 31, 2015.
Regulatory Affairs Sector
Treasury Board of Canada Secretariat
Notice is given that the Governor in Council, pursuant to sections 7 and 10 of the Red Tape Reduction Act (see footnote a), proposes to make the annexed Red Tape Reduction Regulations.
Interested persons may make representations concerning the proposed Regulations within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Bruno Rodrigue, Director, Regulatory Policy Division, Regulatory Affairs, Treasury Board of Canada Secretariat, P3 Floor, 300 Laurier Avenue W, Ottawa, Ontario K1A 0R5 (TTY: 613-957-9090; email: firstname.lastname@example.org).
Ottawa, June 18, 2015
Assistant Clerk of the Privy Council
RED TAPE REDUCTION REGULATIONS
Definition of “Act”
1. In these Regulations, “Act” means the Red Tape Reduction Act.
2. (1) The following definitions apply in this section.
« activité »
“activity” means any activity that is necessary to demonstrate compliance with a regulation.
« période »
“period” means an interval of time during which an activity is expected to be completed by a business in accordance with a regulation.
Total number of periods
(2) For the purpose of this section, the total number of periods is determined by multiplying the number of times per year that the activity is expected to be completed by 10, which number is the number of years for which the calculation is being made.
Calculation of administrative burden
(3) For the purpose of section 5 of the Act, the cost of the administrative burden imposed by a regulation is the sum of the cost of each activity that is expected to be completed during the first 10 years after the regulation is registered and is calculated in accordance with the following formula:
A × 0.142378 ÷ 1.07B − 2012
A is the activity cost that is the sum of the cost for each activity for each period, and is calculated in accordance with the following formula:
C × D × E ÷ 1.07F ÷ G
- C is the estimated hourly cost of labour, adjusted to 2012 price levels using the Consumer Price Index set out by Statistics Canada in CANSIM Table 326-0021, as amended from time to time, that is required in a period so that a business is able to complete the activity within that period;
- D is the estimated number of hours required in a period so that the business is able to complete the activity within that period;
- E is the estimated number of businesses that are required in a period to complete the activity within that period;
- F is the specific period, out of the total number of periods determined in accordance with subsection (2), for which the calculation is being made; and
- G is the number of times per year that the activity is required to be completed; and
B is the year the regulation is registered.
3. A regulation must be amended or repealed in accordance with section 5 of the Act within 24 months after the day on which a regulation that imposes a new administrative burden is registered.
4. (1) If a regulation has been amended or repealed before a regulation that imposes a new administrative burden is made and the prior repeal or amendment offsets the cost of the new administrative burden that is imposed, one or more regulations do not need to be amended or repealed in accordance with subsection 5(1) of the Act.
(2) If a regulation has been repealed before a new regulation that imposes an administrative burden is made, a regulation does not need to be repealed in accordance with subsection 5(2) of the Act.
Application of section 5 of Act
5. Section 5 of the Act applies to any regulation that is made, amended or repealed after March 31, 2012.
6. The Treasury Board may exempt a regulation from the application of section 5 of the Act
- (a) if the regulation is related to tax or tax administration;
- (b) if Her Majesty in right of Canada has no discretion regarding the requirements that must be included in the regulation due to international or legal obligations, including the imposition of international sanctions or the implementation of Supreme Court of Canada decisions; or
- (c) in emergency, unique or exceptional circumstances, including if compliance with that section would compromise public health, public safety or the Canadian economy.
Contents of annual report
7. The annual report referred to in section 9 of the Act must contain the following information:
- (a) a summary of the increases and decreases in the cost of administrative burden that results from regulatory changes that are made in accordance with section 5 of the Act within the 12-month period ending on March 31 of the year in which the report is made public; and
- (b) the number of regulations that are amended or repealed as a result of regulatory changes that are made in accordance with section 5 of the Act within that 12-month period.
COMING INTO FORCE
8. These Regulations come into force on the day on which they are registered.