Red tape weighing down small businesses: Survey

The average business spends nearly 4% of its annual expenditure complying with regulation and one-third of businesses say the level of red tape hinders willingness to take on more employees, a survey has found.

According to an Australian Industry Group/Deloitte survey of 322 chief executives across the manufacturing, services and construction sectors, 70% of CEOs say compliance costs are rising, driven by demands in occupational health and safety, environmental protection, and taxation.

The survey, conducted in the first half of July, found that more than 75% of CEOs expect costs to continue to rise during the next three years, particularly as the carbon tax is introduced.

John Meacock, Deloitte managing partner, says despite some negative elements in the survey there is hope that the upcoming tax forum and meeting between the Federal Government and the states could lead to ways of reducing that 4% to a more desired level of 2%.

“The real issue is while hopefully there are some things happening there is an ongoing increase in regulation across a number of areas,” Meacock says.

“And one of the issues that big business will tell you is in essence there’s overlapping regulating and they’re providing the same information to different people.”

Asked whether that was a case for harmonisation, Meacock said “absolutely”, adding that many businesses have said they have at least eight regulators.

AIG chief executive Heather Ridout says the report highlights the burden regulation is having on the costs of doing business in Australia.

“Despite all the talk of aspiring to be a seamless national economy our red tape burden is rising, not falling,” Ridout said.

She says the carbon tax, occupational health and safety issues, workers’ compensation, industrial relations and regulations affecting the employment of labour were all identified as issues for CEOs.

The survey found that small businesses spend much less time on compliance than larger companies – 7.3 hours per week versus 27.2 hours per week for those with 100 employees or more.

Meacock of Deloitte says while smaller businesses spend less time on compliance they also have less capacity to deal with it.

“But whether big or small they’d all say it’s slowing growth,” Meacock says.

He says spending 2% on compliance rather than 4% should be targeted. “Nobody’s arguing against regulation but it certainly is a concern,” he says.

Ridout recommends the Government:

• Review the effectiveness of state government initiatives to reduce the regulatory burden.
• Make regulatory impact statements more consistent and transparent.
• Improve regulatory agency interaction with the business community.
• Hurry up the implementation of the Council of Australian Government reform initiatives.

This article first appeared on SmartCompany.