ACCI NATIONAL RED TAPE SURVEY

ACCI NATIONAL RED TAPE SURVEY

ABN 85 008 391 795 Canberra Office COMMERCE HOUSE Level 3, 24 Brisbane Avenue Barton ACT 2600 PO BOX 6005 Kingston, ACT 2604 AUSTRALIA T: 02 6273 2311 F: 02 6273 3286 E: info@acci.asn.au Melbourne Office Level 3, 486 Albert Street East Melbourne VIC 3002 PO BOX 18008 Collins Street East Melbourne VIC 8003 AUSTRALIA T: 03 9668 9950 F: 03 9668 9958 E: melb@acci.asn.au W: www.acci.asn.au Australian Chamber of Commerce and Industry 2012 This work is copyright. Reproduction is permitted, with direct attribution and notification to the Australian Chamber of Commerce and Industry. 2

CONTENTS ABOUT THE SURVEY... 4 EXECUTIVE SUMMARY... 5 TIME SPENT ON REGULATORY COMPLIANCE... 6 COST OF COMPLIANCE... 7 BUSINESS EXPERIENCE WITH REGULATORY REQUIREMENTS... 8 AREAS OF REGULATORY COMPLIANCE... 13 OPPORTUNITY TO IMPROVE COMMUNICATION... 14 REDUCING RED TAPE... 16 PAYROLL TAX... 20 APPENDIX I... 21 3

ABOUT THE SURVEY The inaugural ACCI National Red Tape Survey has been designed to identify and understand the administrative complexity and the impact of the burden of regulatory compliance faced by Australian businesses. In addition, the survey identifies the financial and human resources required by business to meet such responsibilities. The survey seeks to better identify and understand the cumulative impact of the regulatory burdens faced by Australian businesses, which impede productivity, innovation, investment, employment and growth. Finally, it seeks to identify solutions to easing the burden. A total of 870 businesses were surveyed, across every state and territory, representing different business sizes and across all industries. The majority of businesses responding to the survey had between 1 and 49 employees, clearly representative of the small and medium business sector. Additional detail about respondents can be found in Appendix I. The ACCI National Red Tape Survey was distributed through ACCI s state and territory based chamber of commerce and selected industry association members from 20 August to 10 September 2012. 4

EXECUTIVE SUMMARY The private sector needs governments to ensure that economic and regulatory reform delivers intended outcomes at the lowest cost to business and with maximum productivity gains. Relieving the red tape burden is a shared objective of the private sector and governments at local, state and national levels. Translating that into practice has largely eluded governments across the federation, notwithstanding the best of intention evidenced by the recently created COAG Business Advisory Forum. Increasingly, business reporting requirements, administrative burdens and the complexity and accumulation of regulation work against this goal. The burden of red tape is costing business and the community, contributing to stagnant productivity growth. ACCI s first dedicated National Red Tape Survey seeks to measure the impact of regulation and reporting obligations on the majority of Australian businesses the small and medium sector. Using our unique network of chambers of commerce and industry associations, we have developed a survey that captures this complexity and its impact on the Australian economy. In addition, the survey invited businesses to identify solutions. The survey is also reflective of ACCI s commitment to an evidence-based approach to policy development and government decision-making. Less red tape allows business to be flexible, innovative and adaptive to changing economic conditions, a must in today s global economy. As the nation s largest and most representative peak business council, ACCI encourages governments to use this survey to drive improved policy outcomes. The results will also be presented to the next meeting of the COAG Business Advisory Forum, on which ACCI and our members are represented. 5

TIME SPENT ON REGULATORY COMPLIANCE Almost one-half (44.0 per cent) of respondents spent 1 to 5 hours per week complying with regulatory requirements, with a further 11.7 per cent of respondents spending more than 20 hours per week on compliance. It is concerning that almost three-quarters (72.4 per cent) of businesses reported an increase in the overall time it takes to comply with regulation over the past two years. In contrast, only 0.6 per cent of respondents indicated a fall in time spent on compliance over that same period. More than a quarter (30.7 per cent) of respondents outsourced services in preparing their tax return. Nonetheless, businesses indicated that they still need to compile all the information required for their tax agent or accountant. It is concerning that 15.5 per cent of businesses spent more than 50 hours in preparing their last tax return. Time spent per week Less than 1 hour 16.1% 1 to 5 hours 44.0% 6 to 10 hours 16.1% 11 to 20 hours 9.9% More than 20 hours 11.7% None, I outsourced the services 2.1% Time spent per week on complying with government (Federal, State or Local) regulatory requirements (filling out forms, applying for permits, reporting business activity, etc.) Overall time spent in the past two years Increased 72.4% Stayed the same 23.1% Decreased 0.6% Not sure 3.9% Overall time it takes to comply with government regulatory requirements in the past two years 6

Time spent on last tax return 1 to 4 hours 7.1% 5 to 15 hours 16.4% 16 to 30 hours 13.7% 31 to 50 hours 9.3% More than 50 hours 15.5% None, I outsourced the services 30.7% N/A 7.3% Time spent on preparing last year Tax Return COST OF COMPLIANCE Almost one-half (42.2 per cent) of businesses reported that they spent more than $10,000 to comply with government regulatory requirements, with 26.1 per cent of respondents indicating that they spent up to $50,000 on compliance, which is almost equivalent to the cost of employing a full-time worker. 73.1 per cent of businesses noticed that the overall cost of compliance has increased in the past two years, compared with only 0.4 per cent of respondents indicating that cost has declined over the same period. Estimated cost Less than $1,000 14.5% $1,000 to $5,000 25.5% $5,001 to $10,000 17.8% $10,001 to $50,000 26.1% $50,001 to $100,000 9.2% More than $100,000 6.9% Estimated total cost of complying with government regulatory requirements 7

Overall cost of compliance in the past two years Increased 73.1% Stayed the same 19.7% Decreased 0.4% Not sure 6.8% Overall cost of complying with government regulatory requirements in the past two years BUSINESS EXPERIENCE WITH REGULATORY REQUIREMENTS Nearly two-thirds (59.7 per cent) of respondents considered that complying with government regulatory requirements has a moderate to major impact on their business. Comments from business reflect an overwhelming frustration with the administrative requirements and /or their inconsistency: Resources allocated to compliance issues could be used delivering the service or making other improvements. Forms and paperwork take my time away from doing what I should be doing. Inventing recipes [and] preparing and cooking of such. With every hour spent on government regulatory compliance is less time I spend on dealing with my revenue-generating customers. In our industry we are working with a government agency wanting one outcome and another wanting a different outcome, both conflicting with each other - which means each is pulling business in opposite directions, a poor outcome. While others report a change in their operations completely: We employ one person just to comply with all regulations - it is for that reason we have moved to off shore manufacturing. We have partners with companies in the USA and employ over 20 jobs in the USA. These are jobs lost from the Australian and local regional economy. 8

Impact of government regulatory requirements Yes, it has a major impact 22.2% Yes, in a moderate way 37.5% Yes, but it s a minor impact 29.4% No impact 10.8% Impact on business of complying with government regulatory requirements More than one-half (54.3 per cent) of businesses surveyed indicated that complying with regulatory requirement has to some extent prevented them from making necessary changes to grow or expand their business. Some report the immediate resource implications: The high cost of compliance has reduced cash flow to the extent that there is little left over for business development I have shrunk my business in order to reduce compliance costs and penalties. We would like to expand our business however costs to meet local government charges and red tape to get approval has meant we just can t afford to expand. While for some it is the decision of the regulator: Local council regulations prevent enlarging the premises to grow the business Building regulations have brought infrastructure development to [a] halt. In order to renovate the premises there are five different and conflicting governmental regulatory bodies to thread a way through ranging from heritage, workplace health safety, local council zoning, state and federal workplace rules and then building codes. It is much easier to do nothing. 9

Compliance preventing business growth Yes 27.7% Somewhat 26.6% No 32.9% Not Sure 12.9% Compliance with regulatory requirements preventing businesses from making changes to grow the business It is alarming that 43.6 per cent of businesses believed that their industry is overregulated, compared to only 6.3 per cent indicating their industry is under-regulated. The cumulative impact of regulation is reported as a concern: So many different government agencies have rules and/or regulations that have an impact on our business and they all are administered differently. Food labelling regulations are already difficult and plenty of agencies are pushing for more regulation and complexity. Licencing rules are often overly complicated and leave little room for common sense. The recent addition of an annual return which requires us to document all subcontractors we use each time we pay them seems pointless, and an example of getting small business taxpayers to do the accounting for the government. Level of industry regulation Over-regulated 43.6% About right 35.4% Under-regulated 6.3% Not Sure 14.7% Business perception on the level of regulation in their industry 10

It is concerning that 45.4 per cent of businesses indicated that they are required to comply with regulations that make no sense to them; while almost one-half (49.9 per cent) of respondents indicated that they are required to comply with regulations that are poorly enforced or businesses have concerns about the regulator s behaviour. Consistency is a core theme suggesting that regulation could be made more efficient, particularly across jurisdictions: Different levels of Government have varying regulation, where if the regulation is uniform, the nation and levels of government could be uniform and systemised keeping it simple and straight forward. Inconsistency of health inspections and unclear requirements for food safety Subcontractor definitions in various agencies. Poison scheduling in the different states is not consistent. Compliance with regulation that are not justified Yes 45.4% No 31.1% Not Sure 23.5% Compliance with regulations that are not justified or make no sense Compliance with poorly enforced regulation Yes 26.7% Somewhat 23.2% No 33.3% Not Sure 16.9% Compliance with regulations that are poorly enforced or where businesses are concerned about the regulator s behaviour 11

26.8 per cent of respondents specified that the most costly stage of complying with government regulatory requirements is implementing the compliance obligations and practising these within the business, closely followed by preparing the information and reports (24.3 per cent). Over one-fifth (23.7 per cent) of businesses have been reporting the same information to different government agencies, with a further 36.2 per cent indicating that they are unsure if they were reporting duplicate information. Most costly stage of compliance Finding information about the obligations 10.7% Understanding the obligations 11.6% Preparing the information and reports 24.3% Implementing the compliance obligations 26.8% Not sure 7.2% Most costly stage of the overall compliance process Duplication in reporting Yes 23.7% No 40.1% Not sure 36.2% Reporting same or similar information to different federal/state/local government agencies 12

AREAS OF REGULATORY COMPLIANCE It is concerning that the majority of respondents reported that the level of complexity in workplace relations regulations is higher in comparison to other areas of compliance, with high levels of complexity reported in: workplace health and safety (53.2 per cent); wages and conditions of employment (49.6 per cent); employing workers (48.9 per cent); and unfair dismissal (42.3 per cent). Area of compliance High Moderate Low N/A Starting a business 29.9% 31.3% 12.8% 26.0% Dealing with licences 25.1% 41.3% 20.3% 13.3% Obtaining finance or credit 31.3% 34.0% 20.3% 14.4% Paying taxes 31.1% 46.8% 15.8% 6.2% Tendering for government contracts 39.0% 13.3% 5.3% 42.3% Environmental compliance 25.6% 30.4% 23.5% 20.5% Building regulations and approvals 33.3% 23.3% 10.9% 32.6% Employing workers 48.9% 36.3% 9.1% 5.7% Wages and conditions of employment 49.6% 35.1% 9.1% 6.2% Unfair dismissal 42.3% 24.2% 16.4% 17.1% Workplace health and safety 53.2% 31.1% 12.8% 2.8% Level of regulatory and compliance complexity across business areas 13

OPPORTUNITY TO IMPROVE COMMUNICATION More than one-half of the respondents indicated that they received information about regulatory changes from their industry association (55.5 per cent) and state or local chamber of commerce (51.4 per cent) respectively. 48.8 per cent of businesses indicated that they received information about changes in regulation directly from the regulator or government agency and 44.3 per cent of businesses also indicated that they seek out the information themselves. Source of information I seek out the information myself I don t wait to be advised 44.3% Directly from the regulator or government agency 48.8% Your state or local chamber of commerce 51.4% Industry association 55.5% Newsletters (including on-line publications) 41.1% Other business owners/ colleagues/ friends 40.9% As a result of an audit or inspection 19.4% Source of information about regulatory changes The majority of respondents (39.9 per cent) indicated that they prefer to receive information about regulatory changes via emails from their industry association or state or local chamber of commerce, followed closely by emails from the government agency (38.3 per cent). Only around 2 per cent of respondents indicated that they prefer to make face-to-face inquiries at the government agency or telephoning the agency to learn about changes in regulation. 14

Preferred information channel Accessing the information yourself via websites 12.6% Telephoning the agency 2.1% Making face-to-face inquiries at agency 2.1% Attending events held by the agency 5.0% Receiving emails from the agency 38.3% Receiving emails from your state or local chamber of commerce/ Industry Organisation 39.9% Preferred method for finding out about changes in regulation In comparing the quality of business communication among the three tiers of government Federal, State and Local government 38.4 per cent of businesses considered that Local Government s communication is inadequate, as business rarely know about new regulatory developments and reviews. The State and Federal Government were considered to be the more effective communicators, with 30.2 per cent and 28.5 per cent of businesses respectively spending some time searching and finding that information is readily available. It is disappointing that less than seven per cent of respondents indicated that they are aware of new developments and reviews in Federal (6.7 per cent), State (5.3 per cent) and Local (6.4 per cent) Governments. Effectiveness of government communication to businesses Good communication, I am aware of new developments and reviews I spend some time searching but information is readily available I spend a lot of time searching in order to keep up to date Inadequate communication, I rarely know about new developments and reviews Federal State Local 6.7% 5.3% 6.4% 28.5% 30.2% 22.0% 26.2% 25.3% 17.3% 27.7% 29.1% 38.4% Not sure 10.9% 10.1% 16.0% Level of regulatory and compliance complexity across business areas 15

REDUCING RED TAPE In the survey, businesses were asked to rate the level of complexity in dealing with Federal and State regulatory authorities and ways to reduce red tape burden. The top five Federal agencies that were considered to have a moderate to high level of red tape burden are as follow: i. Australian Taxation Office (73.2 per cent) ii. Fair Work Australia (56.0 per cent) iii. Centrelink (45.6 per cent) iv. Department of Education, Employment and Workplace Relations (43.1 per cent) v. Australian Securities and Investments Commission (32.1 per cent) The top five State agencies that were considered to have a moderate to high level of red tape burden are as follow: i. Local Government (57.5 per cent) ii. Safety Regulator, e.g. Safe Work, WorkCover etc. (55.9 per cent) iii. Office of Industrial Relations (46.0 per cent) iv. State Revenue Office (39.5 per cent) v. Roads / Transport Authority (35.5 per cent) When asked, business reported that the three most effective measures in reducing the cost of regulatory compliance are: i. Better communication about how to comply with existing regulations (64.9) ii. Reducing the number of existing regulations (61.4) iii. Better communication and consultation with businesses when developing new regulations (61.0) 16

Level of complexity when dealing with Commonwealth Regulatory Authority High Moderate Low Not complicated N/A Australian Competition and Consumer Commission 7.1% 16.1% 12.9% 4.0% 59.9% Australian Quarantine and Inspection Service 8.9% 11.9% 7.5% 2.4% 69.2% Australian Securities and Investments Commission 8.5% 23.6% 21.6% 10.5% 35.7% Australian Skills Quality Authority 5.4% 6.9% 6.7% 2.0% 79.0% Australian Taxation Office 31.5% 41.7% 13.7% 8.3% 4.8% Centrelink 24.4% 21.2% 9.1% 3.8% 41.5% Department of Education, Employment and Workplace Relations Department of Families, Community Services and Indigenous Affairs 17.3% 25.8% 11.1% 4.2% 41.7% 8.3% 11.3% 7.7% 3.4% 69.2% Department of Health 9.5% 11.9% 9.3% 1.8% 67.5% Department of Immigration 11.5% 8.9% 7.7% 1.6% 70.2% Department of Sustainability, Environment, Water, Population and Communities 10.9% 12.5% 8.7% 2.4% 65.5% Fair Work Australia 27.8% 28.2% 11.5% 4.6% 28.0% Fair Work Ombudsman 14.9% 17.1% 12.3% 3.6% 52.2% Office of Environment and Heritage 9.1% 7.7% 8.1% 2.6% 72.4% Level of red tape in dealing with various Commonwealth regulatory authorities 17

Level of complexity when dealing with State Regulatory Authority High Moderate Low Not complicated N/A (Department of) Education / Training / Workforce Development 11.3% 22.4% 13.1% 5.8% 47.4% (Department of) Environment 13.5% 13.1% 10.5% 3.0% 59.9% (Department of) Health 9.5% 15.1% 9.7% 3.2% 62.5% (Department of) Planning 20.2% 14.1% 6.5% 1.8% 57.3% (Department of) Regional Development 8.1% 12.9% 10.7% 2.4% 65.9% (Department of) Trade 5.6% 11.1% 10.3% 2.4% 70.6% Fair Trading / Consumer Affairs 11.3% 22.2% 19.8% 5.4% 41.3% Food Authority 6.3% 8.1% 8.7% 1.4% 75.4% Industrial Relations 21.0% 25.0% 14.5% 4.0% 35.5% Local Government 26.2% 31.3% 14.5% 5.4% 22.6% Regulation Office 6.9% 12.1% 9.5% 2.6% 68.8% Safety Regulator (e.g. Safe Work, WorkCover) 24.0% 31.9% 15.9% 4.6% 23.6% Roads / Transport Authority 16.1% 19.4% 14.3% 4.6% 45.6% State Revenue Office 15.9% 23.6% 16.3% 3.8% 40.5% Level of red tape in dealing with various State regulatory authorities 18

Measures to reduce cost of compliance Index Better communication about how to comply with existing regulations 64.9 Reducing the number of existing regulations 61.4 Better communication and consultation with businesses when developing new regulations Improving the quality of existing regulations (making them easier to understand) 61.0 57.0 Limiting the extent of annual fee increases 56.5 Increasing compliance thresholds so that low risk small business do not have to comply 56.5 Agencies sharing information to reduce duplication in reporting 55.9 Reducing fees for permits and/or licences 55.2 Benchmarking performance against other jurisdictions to achieve best practice and lowest cost 44.5 Measures that would have greatest impact on reducing the cost of compliance 19

PAYROLL TAX ACCI s 2010 Pre-Election Survey found that payroll tax ranked amongst the top five tax reform priorities for Australian businesses. Complexity and non-neutralities in the payroll tax regimes can have pervasive effects on competition through its effect on the locational decisions of firms. The burden of payroll tax also negatively affects employers decisions to expand business operations and increase wages and employment. In this survey, more than one-half of respondents were obliged to pay payroll tax, with 40.9 per cent paying tax in single state and the remaining 12.4 per cent paying tax in multiple jurisdictions. The majority (47.0 per cent) of businesses indicated that a reduction in the payroll tax rate or an increase in threshold will help create new employment opportunities in their businesses. Payroll tax obligation No 46.8% Yes single state only 40.9% Yes in multiple States 12.4% Business payroll tax obligation Employment impact No 31.7% Yes 47.0% Not sure 21.4% Reduction in the payroll tax rate or increase in threshold helps create new employment opportunities 20

APPENDIX I Number of employees Percentage of respondents Non-employing 5.4% 1 to 4 17.4% 5 to 9 19.5% 10 to 19 19.4% 20 to 49 17.1% 50 to 99 8.2% More than 99 13.0% Respondents by Industry Top 10 Percentage of respondents Manufacturing 14.9% Retail trade 9.5% Professional, scientific and technical services 7.9% Construction 7.6% Health care and social assistance 7.2% Accommodation and food services 5.4% Wholesale trade 5.1% Financial and insurance services 4.6% Transport, postal and warehousing 4.0% Education and training 3.8% Business operation My business only operates in one State 66.3% My business operates in more than one State 15.3% My business operates in one State and internationally 3.7% My business operates in more than one State and internationally 14.7% 21

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