Red Tape Survey October 2008

Transcription

1 Red Tape Survey October 2008

2 Contents Executive Summary 2 Summary of Responses 4 Overview of Results 6 Business Experience with Regulatory Requirements 7 Cost to Business in Complying with Regulatory Requirements 8 Government Communication on Regulatory Requirements 11 Reducing Red Tape 13 1

3 Executive Summary The NSW Business Chamber s Red Tape Survey is an annual survey designed to assist in identifying and understanding the regulatory burdens faced by businesses that inhibit innovation and create unnecessary barriers to productivity, investment and growth. The specific objectives of the Red Tape Survey are to: > Understand the regulatory burdens faced by businesses in Australia; > Advance business recommendations and views on how to improve regulation; and > Encourage research that leads to better regulation and lower administration costs for both business and taxpayers. The 2008 survey was released on 9 September 2008 to NSW Business Chamber, Sydney Chamber of Commerce, Hunter Business Chamber and Illawarra Business Chamber members. It closed on 12 September 2008 with a 10 per cent response rate. The questionnaire consisted of: > three questions on the characteristics of the respondents business; > seven questions on the impact of regulatory requirements; > two questions on financial cost and time consumption of complying with regulatory requirements at various stages of business operations; > one question on respondents rate of business growth; > one question on carbon footprint reporting; > two questions on the level of red tape in dealing with different regulatory authorities; > three questions on opportunities for government to streamline reporting; > one question on the effectiveness of Federal, State (NSW) and Local Government communication on new or changed regulatory requirements; and > one question for additional comment from respondents. Over two-thirds (69.8%) of respondents believe that complying with government regulatory requirements has a moderate to major impact on their business. In the last two years, around three-quarters of the businesses surveyed have noticed an increase in the cost of compliance and the time it takes to comply with regulatory requirements. In comparing the quantity and quality of communication among three tiers of government Federal, State (NSW) and Local just under two-fifths (39.1%) believe that Local Government s communication is inadequate, in other words businesses rarely know about new developments and reviews. Similarly, one-third (33.3%) believe that the State (NSW) Government s communication is inadequate. Federal Government seems to be the better than these two as less than one-third (32.4%) spend some time searching but information is available. The NSW Better Regulation Office is one agency that has an opportunity to open the communication lines between the State Government and the business community. Over two-thirds (68.9%) of businesses consider that there is an opportunity to streamline reporting and reduce its on business operations. The NSW Business Chamber welcomes the NSW Government s commitment to reducing red tape and progress to address recommendations made in IPART s Investigation into the Burden of Regulation and Improving Efficiency which was released in October However, IPART s research does not emphasise the importance of key contributors to red tape - growth in the volume of regulation and the frequency of reporting requirements. Over half (56.0%) of surveyed businesses highlighted that reducing the frequency of reporting requirements would have the greatest impact in reducing the cost of compliance. The NSW Business Chamber s submission to the Productivity Commission s Annual Review of 2

4 Regulatory Burdens on Business: Manufacturing and Distributive Trades advocated a one in, one out approach to managing regulation at all levels of government. 1 IPART dismissed the approach as rigid and quantity based in their research but failed to acknowledge that its adoption in the UK and a less restrictive version in Victoria have had positive effects. Reducing regulatory burdens should be part of making good laws. 2 The NSW Business Chamber s submission has four key recommendations: > Establish an agency responsible for making regulatory requirements easier to understand and comply with. This task includes clearer communications about which regulatory bodies businesses have to respond to and why. > Adopt a one in, one out approach to regulation at all levels of government, whose progress is tracked by transparent impact statements for all non-trivial regulatory changes. > Establish a permanent body dedicated to reviewing regulatory requirements, whose activities are reported at Cabinet level. Ad hoc taskforces are insufficient to the task of systemically lessening the regulatory burden of Commonwealth legislation. > Identify major regulatory inconsistencies within and between industries and develop a common national reform plan. The growth of regulation and administrative compliance costs and the lack of co-ordination on regulatory reform across state and federal jurisdictions has been a huge problem for business. The annual cost of complying with regulations could be 4 per cent of gross domestic product or almost $50 billion, and the efficiency gains from removing unnecessary regulation could add $20 billion a year to the economy, research suggests. 3 These findings indicate that more emphasis is needed on improving the quality and reducing the quantity of regulation to ensure Australia s competitiveness. 1 NSW Business Chamber, (2008), Submission to the Productivity Commission s Annual Review of Regulatory Burdens on Business: Manufacturing and Distributive Trades, < y_burden_review.pdf> 2 OECD, (2007), Cutting Red Tape: National Strategies, < 3 SMH, (2007), Red tape test to show whether Labor can cut it, < 3

5 Summary of Responses Business Response Time spent on compliance (per week) Impact on business Most costly stage of compliance Financial cost of compliance Time consumption of compliance Cost of compliance in last 2 years Time consumption of compliance in last 2 years Time spent on last tax return Impact of NSW Government s moves to harmonise payroll tax obligations with other States 41.8% spend 1 to 5 hours per week on compliance with regulatory requirements 20.0% spend more than 20 hours per week on compliance with regulatory requirements 43.1% have been MODERATELY impacted by regulatory requirements 26.7% have been SIGNIFICANTLY impacted by regulatory requirements 52.0% found that preparing the information is the most costly stage of the compliance process 26.7% found that understanding the obligations is the most costly stage of the compliance process 77.8% found that paying taxes is a MODERATE TO HIGH financial cost of compliance 36.0% found that getting credit is a MODERATE financial cost of compliance 81.4% found that employing workers is a MODERATE TO HIGH financial cost of compliance 39.6 % found that dealing with licences is a MODERATE financial cost of compliance 59.1% found that starting a business is a MODERATE TO HIGH financial cost of compliance 76% found that paying taxes is a MODERATE TO HIGH time consumption of compliance 35.6% found that getting credit is a MODERATE time consumption of compliance 85.4% found that employing workers is a MODERATE TO HIGH time consumption of compliance 64.9% found that dealing with licences is a MODERATE TO HIGH time consumption of compliance 41.3% found that starting a business is a HIGH time consumption of compliance 74% have noticed an INCREASE in the cost of compliance with regulatory requirements in last 2 years 75.1% have noticed an INCREASE in the time it takes to comply with regulatory requirements in last 2 years 21.3% outsourced the preparation of the last tax return 20.9% spent 5 to 15 hours preparing the last tax return 20.4% spent more than 50 hours in preparing the last tax return 53.8%* found that recent harmonisation in payroll tax obligation DID NOT reduce their tax burden 19.6%* found that recent harmonisation in payroll tax obligation produced an INSIGNIFICANT REDUCTION of their tax burden *(Please note that respondents were not distinguished from those that pay payroll tax to those that do not.) 4

6 Impact of red tape on innovation Requirement to report carbon footprint to Federal, State (NSW) or Local Government Difficulty in dealing with regulatory authorities Opportunity to streamline reporting Ways to reduce cost of compliance Effectiveness of Federal, State (NSW) and Local Government communicating and providing information about new or changed regulation that businesses are required to comply with. 34.7% found that red tape HAS NOT prevented their business from making changes to grow the business 32.0% found that red tape has SOMEWHAT prevented their business from making changes to grow the business FEDERAL 60.0% are NOT required to report their carbon footprint 36.4% are NOT SURE if they are required to report their carbon footprint STATE (NSW) 60.0% are NOT required to report their carbon footprint 36.8% are NOT SURE if they are required to report their carbon footprint LOCAL 60.0% are NOT required to report their carbon footprint 37.3% are NOT SURE if they are required to report their carbon footprint 46.7% found that there is MODERATE level of red tape in dealing with Australian Taxation Office 33.8% found that there is HIGH level of red tape in dealing with Australian Taxation Office 34.7% found that there is MODERATE level of red tape in dealing with WorkCover Authority 25.3% found that there is HIGH level of red tape in dealing with WorkCover Authority 69% consider that there is an opportunity to streamline reporting and make it less of a burden on business 25% are not sure if there is an opportunity to streamline reporting and make it less of a burden on business Over half nominated the following as having the greatest impact on reducing the cost of compliance: 1. Reduce the frequency of reporting requirements to a minimum 2. Agencies sharing information and making sure there are no duplicate information requirements 3. Better communication and consultation with businesses when developing new regulations Other highly rated responses include: 4. Establishing reliable electronic and web-based reporting 5. Establishing one agency which collects all the required information FEDERAL 32.4% spend some time searching but information is available 27.5% found there is inadequate communication and they rarely know about new developments and reviews STATE 33.6% found there is inadequate communication and they rarely know about new developments and reviews 26.9% spend some time searching but information is available LOCAL 39.5% found there is inadequate communication and they rarely know about new developments and reviews 19.3% spend some time searching but information is available 19.3% are not sure 5

7 Overview of Results Respondent Description The majority of the respondents in the NSW Business Chamber s Red Tape Survey were small-to-medium sized businesses, with little engagement in exporting or other direct international business. Over one-third (38.2%) employ 5 to 20 employees and one-fifth (20.0%) employ 1 to 4 people. The respondents varied by industry with a large proportion in manufacturing (17.4%), other services (16.1%), retail trade (12.1%), professional, scientific and technical services (11.2%), and construction (10.3%). NSW Business Chamber has a significant presence in regional NSW, represented by our Regional Advisory Councils, the Illawarra Business Chamber and the Hunter Business Chamber. The cost of regulatory burdens is especially high for small business (who collectively are the largest employers in Australia) and for those operating in regional and rural areas. Many of NSW Business Chamber s members fall into one or both of these categories. 6

8 Business Experience with Regulatory Requirements Just over two-fifths (41.8%) of respondents spend 1 to 5 hours per week complying with government (Federal, State or Local) regulatory requirements such as filling out forms, applying for permits, reporting business information and other information requirements. In contrast, one-fifth (20.0%) spend more than 20 hours per week complying with regulatory requirements. Over two-thirds (69.8%) of respondents believe that complying with government regulatory requirements has a moderate to major impact on their business. Over one-fifth (21.3%) of respondents outsourced services in preparing the last tax return. Similarly, just over one fifth (20.9%) of businesses spent 5 to 15 hours preparing their last tax return and one-fifth (20.4%) spent more than 50 hours preparing their last tax return. Over half (52.0%) of respondents specified that the most costly stage of complying with government regulatory requirements is preparing the information. The second most costly stage of compliance is understanding the obligations (26.7%). 7

9 Cost to Business in Complying with Regulatory Requirements Respondents were given the opportunity to rate the financial cost and the time consumption of compliance across a number of areas: > Starting a Business; > Applying for a Special Purpose Grant; > Dealing with Licences; > Employing Workers; > Registering a Property; > Getting Credit; > Protecting Investors; > Paying Taxes; > Trading Across Borders (Import/Export); > Enforcing Contracts; and > Closing a Business. The categories are similar to that of the latest World Bank Group Doing Business report, which found that Australia has not made any major reforms in the last year to make it easier to do business. Areas which have been identified of concern in Australia are paying taxes and the costs and procedures involved in importing and exporting a standardised shipment of goods. This finding is consistent with the concerns expressed by our member companies in the Red Tape Survey. Financial Cost of Complying with Regulatory Requirements In certain areas businesses believe that complying with some government regulatory requirements is more costly than others. The majority (81.4%) of respondents found that regulatory requirements involved in the area of employing workers have a moderate to high financial cost. Similarily, over three-quarters (77.8%) found that regulatory requirements involved in the area of paying taxes have a moderate to high financial cost. Over one-third (39.6%) of respondents found that in dealing with licences the compliance with regulation has a moderate financial cost to busness. Time Consumption in Complying with Regulatory Requirements There is strong link between financial cost and time consumption. The majority (85.4%) of respondents found that regulatory requirements involved in the area of employing workers have a moderate to high time consumption; that is, they take a lot of time to comply with. Similarily, just over three-quarters (76.0%) found that regulatory requirements involved in the area of paying taxes have a moderate to high financial cost. Over two-thirds (64.96%) of respondents found that in dealing with licences the compliance with regulation has a moderate to high time consumption. 8

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11 Changes in Financial Cost and Time Consumption of Compliance (Last 2 Years) Just under three-quarters (74.2%) of respondents note that the financial cost of complying with government regulatory requirements has increased in the last two years. Similarly, three-quarters (75.1%) of respondents found that the time it takes to comply with government regulatory requirements has increased in the last two years. Recently published Productivity Commission s research report, Performance Benchmarking of Australian Business Regulation: Quantity and Quality, emphasises that between 1 July 2006 and 30 June 2007 NSW enacted new regulatory instruments totalling 4422 pages, almost twice as much than VIC enacted in the same period. 4 This flow of regulation can have an adverse effect on businesses with increased compliance costs as reflected in the Red Tape Survey results. Impact of Red Tape on Innovation Over one-third (34%) of respondents believe that complying with government regulatory requirements has not prevented them from making changes to grow their business. Conversely, a similar number of respondents (32%) believe that it has somewhat prevented them from making changes towards growth. The latest ABS data on innovation in Australian business indicates that in ,one-tenth (10.3%) of Australian firms found that Government regulations or compliance is a barrier to innovation. This was more commonly reported by businesses with 5 to 19 employees and 20 to 199 employees (both at 16%) Productivity Commission, (2008), Performance Benchmarking of Australian Business Regulation: Quantity and Quality, < data/assets/pdf_file/0019/83107/quantity-quality-draft.pdf> 5 ABS, (2008), Innovation in Australian Business , Cat

12 Government Communication on Regulatory Requirements The respondents were given an opportunity to rank the effectiveness of Federal, State (NSW) and Local Governments in communicating and providing information about new or changed regulation that businesses are required to comply with. Just under two-fifths (39.1%) believe that Local Government does not communicate adequately hence businesses rarely know about new developments and reviews. Similarly, one-third (33.3%) believe that the State (NSW) Government s communication is inadequate. Federal Government seems to be the better than these two as over one-third (32.4%) spend some time searching but information is available. The Productivity Commission s report, Performance Benchmarking of Australian Business Regulation: Quantity and Quality, highlights that for all Australian jurisdictions, the onus is on business to be aware of their legal requirements hence frequently changing regulation represents a burden on businesses, as they must become familiar with a new set of requirements. 6 Three-fifths (60.0% to 60.4%) of respondents indicated that they are not required to report on carbon footprint to the Federal, State (NSW) or Local Government. However, just under two-fifths (36.4% to 37.3%) are not sure of they are required to report on their carbon footprint to either level of government. This may be indicative of the somewhat poor level of communication from Government on policy changes and new or changed regulation requirements. 6 Productivity Commission, (2008), Performance Benchmarking of Australian Business Regulation: Quantity and Quality, < data/assets/pdf_file/0019/83107/quantity-quality-draft.pdf> 11

13 The respondents have ranked the level of red tape in dealing with regulatory authorities. Four-fifths (80.4%) believe that the Australian Taxation Office has moderate to high level of red tape followed by Workcover Authority (60.0%) and Office of State Revenue (50.6%). A proportion of businesses surveyed were not required to report to some of the agencies listed below, notably the ACCC, Department of Planning, Food Authority, and Department of Environment and Climate Change. 12

14 Reducing Red Tape Government Efforts to Streamline Reporting Over two-thirds (68.9%) of businesses consider that there is an opportunity to streamline reporting and make it less of a burden on business operations. As mentioned previously, the recent World Bank Group Doing Business 2009 found that Australia has not made any major reforms in the last year in an effort to make it easier to do business. Areas which have been identified of concern are paying taxes and the costs and procedures involved in importing and exporting a standardised shipment of goods. Singapore continues to rank at the top on the ease of doing business, followed by New Zealand, the United States and Hong Kong (China). Despite holding the top ranks, these economies continue to reform. Singapore further simplified its online business start-up service. New Zealand introduced a single online procedure for business startup, lowered the corporate tax and implemented a new insolvency act. It is important that Australia keeps reforming to better serve business and thus retain its competitiveness. The World Bank affirms that simplifying regulation helps businesses and governments alike. Easing burdens would allow businesses to expand faster and generate savings that governments could use to enhance public services. Research generally indicates that countries with burdensome and unnecessary regulation have larger informal sectors, higher unemployment rates and slower economic growth and development. 7 At the start of July 2008, NSW was one of the states that agreed to reform aspects of their respective payroll tax regimes. As part of the agreement, the states and territories agreed to adopt common provisions regarding payroll tax, including: > the timing of lodgement of payroll tax returns, > motor vehicle and accommodation allowances, > fringe benefits, > work performed outside a jurisdiction, and > grouping provisions. However, in the Red Tape Survey over half (53.8%) of respondents found that the moves to harmonise payroll tax have not reduced their business tax burden. Interestingly, over one-fifth (22.2%) of respondents are not sure what impact the payroll tax harmonisation has had on their business. It should be noted that the respondents were not distinguished from the ones that pay payroll tax and the ones that do not. 7 World Bank Group, (2008), Doing Business 2009 Comparing Regulation in 181 Economies (Overview), < 13

15 Opportunity for Information Sharing by Regulatory Agencies Over half (53.3%) of respondents are unsure if reporting could be used by more than on regulatory agency, that is agencies sharing information to avoid duplication. Just under one-third (29.4%) believe that there are areas of reporting where regulatory agencies can share information. These respondents uncertainty about the potential to streamline reporting may reflect the failure of past governments to create national markets and to arrest what Minister Emerson has called the creeping reregulation of product and labour markets. 8 Government agencies should be able to share information and reduce duplicate information requirements imposed on businesses Many of the respondents provided detailed feedback on this question. Some of the comments include the following: > Federal agencies such as Australian Taxation Office and ASIC could share information; > Centrelink could gain access to tax records directly from the ATO, thus alleviating businesses of the responsibility; > WorkCover could use the same reporting for all States to ease the burden of reporting for the businesses that operate inter-state; > Australian Bureau of Statistics requirements could be fulfilled by appropriate regulatory agencies instead of the businesses being responsible to respond to frequent requirements; > One government body could carry out all licensing requirements; > WorkCover, Ministry of Transport, Office of the Transport Safety Investigator, Independent Transport Safety and Reliability Regulator could share information as all have regulatory requirements on safety and accidents and ask for same information in their respective forms. > Australian Quarantine Inspection Service (AQIS) often duplicates the work of Australian Pesticides and Veterinary Medicines Authority (APVMA); > A single contact point for getting information on licences. 8 The Hon Dr Craig Emerson MP, (2008), OECD Study Highlights Need for Business Deregulation, < 14

16 Strategies to Reduce the Cost of Compliance Respondents were given the opportunity to nominate three strategies that government could implement to reduce the cost of compliance. The most selected options are: > Reduce the frequency of reporting requirements to a minimum; > Agencies sharing information and making sure there are no duplicate information requirements; and > Better communication and consultation with businesses when developing new regulations. Many of the respondents consider that the problem does not lie with individual regulations, but with the entire regulatory system. As emphasised in the NSW Business Chamber s NSW Business Priorities 2007 report, most governments periodically undertake red tape reviews, only to provide a one-off cut to regulation without restraining its growth. 9 The accumulated effect of onerous regulation inhibts business investment and economic growth; hence the importance of reducing both the frequency and arduousness of reporting requirements. The NSW Business Chamber advocates net decreases in red tape through the adoption of a one in, one out approach to regulation. This ensures that when governments create a new regulatory burden, at least one existing burden must be removed or reduced. The UK s Better Regulation Taskforce (BRTF) noted that the one in, one out method is about changing the culture of regulation to include continuous evaluation of the necessity of new regulations and consideration of whether some can be removed as a result. 10 Respondents provided detailed feedback on strategies that government could employ to streamline reporting such as: > Better and more relevant communication with businesses such as industry-specific notifications; > Trained staff in taking business queries; > Free compliance training for businesses; > Harmonise definitions; > Have departments that deal with small business communicate with each other to reduce duplication in regulatory requirements; 9 NSW Business Chamber, (2007), NSW Business Priorities 2007, < 10 Better Regulation Taskforce, (2005), Regulation Less is More, Reducing Burdens, Improving Outcomes, <> 15

17 > Standardised superannuation forms for staff selected funds to one online form; > Better coordination between levels of government; > Provide an online system to allow information required for reporting to be imported from various agency websites (such as the E-Tax); Many respondents favoured the establishment of a reliable electronic and web-based reporting that allowed them to deal with a number of agencies. The NSW Business Chamber welcomes the Australian Government Standard Business Reporting (SBR) initiative, which involves developing record-keeping software to fill government forms automatically and introducing a single point of entry to deal with agencies online. However, the scheme must be carefully designed so as to avoid pushing the cost of implementing SBR on to business, particularly smaller businesses unaccustomed to electronic reporting. 16

18 Contact: Aldina Aljukic, Policy Analyst (Membership & Policy) Telephone: