Red tape on the rise, directors say

Nearly 70% of directors deal with more red tape now than they did 12 months ago, according to the Director Sentiment Index from the Australian Institute of Company Directors.

According to the index, which is based on the responses of 500 directors and senior executives, businesses are becoming increasingly concerned about the level of red tape they have to deal with.

AICD chief executive John Colvin says directors are particularly concerned about issues such as director liability.

“While directors are generally optimistic about the Australian economy, they are concerned about increasing red tape and regulation, and say that laws around director liability affect both their business decision-making and their willingness to sit on a board,” Colvin says.

According to the survey, 41% of respondents said director liability would make them less willing to serve on a board, while 42% said legislation on director liability affected decision-making.

The news comes on the back of a Federal Government announcement that company directors who fail to lodge their tax returns on time could become personally liable for the debts.

Announced as a budget measure, business directors who lodge their tax returns more than three months late may become personally liable for their debts.

Despite the announcement, Small Business Minister Nick Sherry insists the Government is identifying and reducing unnecessary red tape and regulation, namely its pledge to lower the company tax rate for incorporated small businesses.

But according to the index, more than 65% of directors surveyed expect red tape to increase in the next 12 months, while 51% say corporate tax is too high.

The index also highlights directors’ concerns about the potential impact of a carbon price: 55% of respondents believe it will hurt their business.

But the labour market appears to be an even bigger headache, with 54% identifying a skilled labour shortage as their main concern.

“More than half of directors say that skilled labour shortages [are] the main economic challenge facing Australian business,” the report says.

“Low infrastructure spending, the minority Federal Government and too much regulation are also identified as economic challenges by almost 30% of directors.”

AICD spokesperson Steve Burrell says businesses are concerned that because the Government now has to cater to other minority parties, pro-business legislation is not as strong as it could be, and issues are not being addressed quickly enough – such as the skills shortage.

“There is a lot of flip flopping on all sorts of issues, and obviously when you’re trying to satisfy minority parties there are always going to problems,” he says.

However, within their own businesses directors are quite positive, with 37% of businesses surveyed saying they plan to increase staff in the year to December 2011, and 8% saying they plan to increase staff “by a lot”.

“There is a sign of strength among these businesses. They are increasing investment in staff, equipment, and so on. But the flipside of that is there are skills shortages,” Burrell says.