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Groundbreaking research by the Canadian Federation of Independent Business (CFIB) reveals businesses in this country pay $12.6 billion a year ensuring they are filing their taxes correctly, with the smallest companies being hit the hardest.

"This is money being spent on accountants, tax advisers and employee time just making sure the business is complying with the tax system, and that's on top of the taxes remitted," CFIB executive vice-president Garth Whyte in a news release.

"In effect, it is a hidden tax," he added, noting that taxes should not be so complicated that a ton of money needs to be spent to ensure they've been done properly.

"Particularly troubling is that the smaller the business, the greater the cost," said Mr. Whyte, explaining that firms with fewer than five persons pay an average of $3,928 per employee to meet the tax system requirements.

By comparison, he said, businesses with 50 to 499 employees pay $481 per person.

Andreea Bourgeois, CFIB's director of provincial affairs for New Brunswick, said the total cost for N.B. businesses is $280 million every year, or the equivalent of the entire budget for the province's Department of Postsecondary Education, Training and Labour.

"The time and cost associated with tax compliance would be better spent helping businesses grow and become more competitive," said Ms. Bourgeois.

"Now that the cost of tax compliance has been quantified, the problem needs to be addressed," said Mr. Whyte. "It is a significant component of taxation that government at all levels must factor into their policies for the purpose of developing simpler tax systems."

CFIB is recommending that the Canada Revenue Agency (CRA) and provincial tax administrations benchmark and measure tax compliance costs annually.

They also say more resources need to be put into better customer service, and that that the CRA and the provinces communicate changes in tax policy more effectively.

CFID also recommends that an ongoing process be initiated to ease this tax burden on smaller businesses, and that tax compliance costs be a factor in developing federal-provincial tax policies.