Red Tape Survey

December 2009

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Contents

Contents 1

Introduction 2

Executive Summary 3

Summary of Responses 4

Overview of Results 6

Appendix I – Respondents in Detail 14

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Introduction

NSW Business Chamber

NSW Business Chamber is one of Australia’s largest business advocacy groups, providing support and assistance over 22,000 businesses each year. Independent of government, NSW Business Chamber represents the needs of business at a local, state and federal level, lobbying governments and authorities to create a better business environment. The NSW Business Chamber represents over 22,000 businesses, and is affiliated with 119 local and regional Chambers of Commerce throughout NSW.

Red Tape Survey

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 2009 survey was released to 3563 businesses on 8 December 2009 to NSW Business Chamber, Sydney Business Chamber, Hunter Business Chamber and Illawarra Business Chamber members. It closed on 15 December 2009 with an 11.4 per cent response rate.

Survey frequency and sample size

The Red Tape Survey is conducted annually. Overall, 406 business were surveyed. The majority of businesses

responding to the survey had between 5 and 19 employees, and were from a variety of industries.

More detail on respondents can be located in Appendix I.

Regional chamber participation

The Red Tape Survey was distributed through NSW Business Chamber, Hunter Business Chamber, Illawarra

Business Chamber and Sydney Business Chamber.

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Executive Summary

Over one-half (52.1%) of respondents believe that complying with government regulatory requirements has a moderate to major impact on their business. Majority (62.0%) are spending between 1 and 10 hours per week complying with regulatory requirements and some more than 20 hours per week. 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. This figure has not changed since the 2008 survey. In comparing the quantity and quality of communication among three tiers of government – Federal, State (NSW) and Local – just under two-fifths (39.4%) believe that Local Government’s communication is inadequate, in other words businesses rarely know about new developments and reviews. Similarly, just under one-third (32.4%) believe that the State (NSW) Government’s communication is inadequate. The Federal Government was reported to be the better communicator with one-third (32.9%) spending some time searching but finding information was available. Almost one-half (46.5%) of businesses consider that there is an opportunity to streamline reporting and reduce its on business operations. Key contributors to red tape are growth in the volume of regulation and the frequency of reporting requirements. Over one-fifth (21.8%) 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 Better Regulation Office, Reducing the cost of doing business in NSW, 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.

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The NSW Business Chamber’s submission has six key recommendations including:

> Commit to deregulation through binding quantitative targets to reduce the overall stock of existing business regulation.

> Adopt the internationally recognised ‘Standard Cost Model’, in order to estimate and report systematically the financial costs incurred by businesses in demonstrating compliance.

> Restrict the net growth of new regulations by implementing a ‘one in, one out’ approach to regulating, similar to that already operating in Victoria and the United Kingdom.

> Explore opportunities to improve management, simplify Budget processes and reduce duplication by extending the process of agency rationalization.

> Make ministries and agencies more transparent and accountable, by specifying in the Budget both the quantity and cost of delivering major services, as well as their quality and timeliness.

> Align its procurement practice with that of the Federal Government and other jurisdictions, by committing to pay small business suppliers within 30 days. There are also needs to be a consistent whole-of-government policy on awarding penalties. The NSW Government should in addition nominate the minister and agency responsible for monitoring and enforcing the timely payment of private suppliers by NSW Government agencies.

1 NSW Business Chamber, (2009), Submission to the Better regulation Office: Reducing the cost of doing business in NSW,

<http://www.nswbusinesschamber.com.au/reference/media_centre/20090216_NSW_BRO_submission_Main.pdf> 2 OECD, (2007), Cutting Red Tape: National Strategies, < http://www.oecd.org/dataoecd/10/26/39609018.pdf>

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Summary of Responses

Time spent on compliance (per week)

42.2% spend 1 to 5 hours per week on compliance with regulatory requirements

19.8% spend between 6 to 10 hours per week on compliance with regulatory requirements

Impact on business 52.1% have been moderately to significantly impacted by regulatory requirements

Most costly stage of compliance

50.5% found that ‘preparing the information’ is the most costly stage of the compliance process

34.4% found that ‘understanding the obligations’ is the most costly stage of the compliance process

Financial cost of compliance

79.9% found that ‘paying taxes’ is a moderate to high financial cost of compliance

42.0% found that ‘employing workers’ is a high financial cost of compliance

51.3% found that ‘getting credit’ is a moderate to high financial cost of compliance

Time consumption of compliance

78.7% found that ‘paying taxes’ has moderate to high time consumption of compliance

65.0% found that ‘dealing with licences has moderate to high time consumption of compliance

48.0% found that ‘employing workers’ has a high time consumption of compliance

Cost of compliance in last 2 years

74.3% have noticed an increase in the cost of compliance with regulatory requirements in last 2

years

Time consumption of compliance in last 2 years

75.5% have noticed an increase in the time it takes to comply with regulatory requirements in

last 2 years

Time spent on last tax return

20.4% spent 5 to 15 hours preparing the last tax return

19.4% spent more than 50 hours preparing the last tax return

Impact of NSW Government’s moves to harmonise payroll tax obligations with other States

43.4%* found that recent harmonisation in payroll tax obligation did not reduce their tax burden

*(Please note that respondents were not distinguished from those that pay payroll tax to those that do not.)

Impact of red tape on innovation

24.0% found that red tape has prevented their business from making changes to grow the business

Difficulty in dealing with regulatory authorities

68.7% found that there is moderate to high level of red tape in dealing with Australian Taxation

Office

53.2% found that there is moderate to high level of red tape in dealing with WorkCover

Authority

52.1% found that there is moderate to high level of red tape in dealing with Local Councils

Opportunity to streamline reporting

46.5% consider that there is an opportunity to streamline reporting and make it less of a burden on business

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Ways to reduce cost of compliance

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. Establishing one agency which collects all the required information

3. Better communication and consultation with businesses when developing new regulations

Effectiveness of Federal, State (NSW) and Local Government communicating and providing information about new or changed regulation that businesses are required to comply with.

FEDERAL

32.9% spend some time searching but information is available

STATE

32.4% found there is inadequate communication and they rarely know about new developments and reviews

LOCAL

39.4% found there is inadequate communication and they rarely know about new developments and reviews

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Overview of Results

Business Experience with Regulatory Requirements

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. Over one-half (52.1%) of respondents believe that complying with government regulatory requirements has a moderate to major impact on their business. Majority (62.0%) are spending between 1 and 10 hours per week complying with regulatory requirements and some more than 20 hours per week.

Impact of government regulatory requirements Response

Major impact 24.0%

Moderate impact 28.1%

Minor impact 42.7%

No impact 5.2%

Red Tape Survey 2009, Impact on business of complying with government regulatory requirements

Hours Response

Less than 1 hour 16.7%

1 – 5 hours 42.2%

6 – 10 hours 19.8%

11 – 20 hours 7.8%

More than 20 hours 10.9%

None, I outsource the services 2.6%

Red Tape Survey 2009, Time spent per week on complying with government (Federal, State or Local) regulatory requirements (filling out forms, applying for permits, reporting business information etc)

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Over half (50.5%) of respondents specified that the most costly stage of complying with government regulatory requirements is preparing the information. The second most costly stage is understanding the obligations of compliance (26.7%).

Just under one-third (29.1%) have been reporting the same information to different government agencies. This indicates that there are areas of reporting where regulatory agencies can share information

Many of the respondents provided detailed feedback on this question. Some of the comments included:

> Payroll information could be shared between the Office of State Revenue, Australian Taxation Office and other relevant authorities;

> Company documents such as annual reports could be shared between authorities that require them; and

> Australian Customs and AQIS could share information.

Most costly stage of compliance Response

Understanding the obligations 34.4%

Preparing the information 50.5%

Submitting the information 1.0%

Dealing with the follow-up 4.7%

Not sure 9.4%

Red Tape Survey 2009, Most costly stage of the overall compliance process

Duplication of reporting Response

Yes 29.1%

No 55.0%

Not sure 15.9%

Red Tape Survey 2009, Reporting the same information to different government agencies

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Cost of Compliance

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. This figure has not changed since the 2008 survey. These responses accord with data from the Productivity Commission, which reveal that as of 30 June 2007, NSW had over 1200 Acts – the highest of any State or Territory and nearly 400 more than ‘runner-up’ Victoria, the next most frequent regulator.

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On the other hand, for the same period NSW recorded a lower number of pages of Acts than Victoria, Queensland and Western Australia, and a lower number of statutory rules than Victoria, South Australia and Western Australia. But the number of pages of new regulatory instruments was highest in NSW.

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Over one-fifth (21.8%) of respondents outsourced services in preparing the last tax return. Similarly, just over one fifth (20.4%) of businesses spent 5 to 15 hours preparing their last tax return and almost one-fifth (19.4%) spent more than 50 hours preparing their last tax return.

Overall compliance in the past 2 years Cost Time

Increased 74.3% 75.5%

Stayed the same 19.2% 18.9%

Decreased 0.7% 1.0%

Not sure 5.8% 4.6%

Red Tape Survey 2009, Overall cost of compliance and time it takes to comply with government regulations in last 2 years

Time spent on last tax return Response

1 – 4 hours 5.3%

5 – 15 hours 20.4%

16 – 30 hours 15.8%

31 – 50 hours 10.6%

More than 50 hours 19.4%

None, I outsource the services 21.8%

N/A 6.7%

Red Tape Survey 2009, Time spent on last tax return

3 NSW Business Chamber, (2009), Submission to the Better regulation Office: Reducing the cost of doing business in NSW,

<http://www.nswbusinesschamber.com.au/reference/media_centre/20090216_NSW_BRO_submission_Main.pdf> 4 ibid., p. 4.

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Over one-third (34.3%) 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 (33.1%) believe that it has somewhat prevented them from making changes towards growth.

The latest ABS data on innovation in Australian business indicates that in 2006-07,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%).

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Over two-fifths (43.4%) of respondents found that the moves to harmonise payroll tax have not reduced their business tax burden. Interestingly, almost one-fifth (18.2%) of respondents are not sure what impact the payroll tax harmonisation has had on their business. It should be noted that respondents were not distinguished from the ones that pay payroll tax and the ones that do not. The results are consistent with the 2008 survey.

Three-fifths (60.0% to 65.7%) of respondents indicated that they are not required to report on their carbon footprint to the Federal, State (NSW) or Local Government. However, just under one-third (28.3% to 29.3%) are not sure of they are required to report on their carbon footprint to either level of government. As observed in the 2008 survey this may be indicative of the somewhat poor level of communication from Government on policy changes and new or changed regulation requirements.

Compliance preventing growth of business Response

Yes 24.0%

Somewhat 33.1%

No 34.3%

Not sure 8.6%

Red Tape Survey 2009, Compliance with regulatory requirements preventing business from making changes to grow the business

Harmonisation of payroll tax with other States reducing tax burden Response

Significant reduction 0.2%

Moderate reduction 4.3%

Insignificant reduction 17.5%

No 43.4%

I don’t pay payroll tax 16.3%

Not sure 18.2%

Red Tape Survey 2009, Reduction of tax burden as a result of NSW Government’s moves to harmonise payroll tax obligations with other States

5 ABS, (2008), Innovation in Australian Business 2006-07, Cat. 8158.0

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Environmental reporting Federal State (NSW) Local

Yes 6.0% 8.2% 11.0%

No 65.7% 62.6% 60.0%

Not sure 28.3% 29.3% 29.0%

Red Tape Survey 2009, Requirement to report environmental information to the Federal, State (NSW) or Local Government

Respondents were given the opportunity to rate the financial cost and the time consumption of compliance across a number of areas. In relation to the most costly compliance areas:

> 79.9% found that compliance related to ‘paying taxes’ has a moderate to high financial cost;

> 42.0% found that compliance related to ‘employing workers’ has a high financial cost; and

> 51.3% found that compliance related to ‘getting credit’ has a moderate to high financial cost.

Respndents found that compliance related to paying taxes, dealing with licences and employing workers to be most time consuming.

Area of compliance High Moderate Low N/A

Cost Time Cost Time Cost Time Cost Time

Starting a Business 29.3% 40.3% 31.4% 24.0% 13.7% 9.1% 25.7% 26.6%

Applying for a Special Purpose Grant

26.1% 31.7% 22.8% 21.1% 10.6% 6.0% 40.5% 41.2

Dealing with Licences 21.3% 26.4% 39.8% 38.6% 25.7% 21.6% 13.2% 13.4%

Employing Workers 42.0% 48.0% 39.3% 36.2% 14.9% 12.2% 3.8% 3.6%

Registering a Property 9.6% 8.6% 28.8% 26.4% 23.0% 19.4% 38.6% 45.6%

Getting Credit 19.9% 24.7% 31.4% 34.1% 26.6% 17.7% 22.1% 23.5%

Protecting Investors 11.5% 11.0% 19.7% 18.9% 13.9% 13.7% 54.9% 56.4%

Paying Taxes 39.6% 36.0% 40.3% 42.7% 17.5% 18.2% 2.6% 3.1%

Trading Across Borders 16.8% 15.3% 15.3% 18.3% 10.8% 8.4% 57.1% 57.8%

Enforcing Contracts 18.2% 18.0% 26.6% 28.5% 25.2% 22.5% 30.0% 30.9%

Closing a Business 9.1% 12.5% 17.5% 14.6% 7.2% 6.2% 66.2% 66.7%

Red Tape Survey 2009, Regulatory burden across business areas – cost and time it takes to comply

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Opportunity for Improved Communication

In comparing the quantity and quality of communication among three tiers of government – Federal, State (NSW) and Local – just under two-fifths (39.4%) believe that Local Government’s communication is inadequate, in other words businesses rarely know about new developments and reviews. Similarly, just under one-third (32.4%) believe that the State (NSW) Government’s communication is inadequate. The Federal Government was reported to be the better communicator with one-third (32.9%) spending some time searching but finding information was available.

Effectiveness of government communication to businesses

Federal State (NSW) Local

Good communication, I am aware of new developments and reviews.

8.7% 5.1%% 4.4%

I spend some time searching but information is available.

32.9% 27.4%% 22.1%

I spend a lot of time searching in order to keep up to date.

22.6% 25.9% 17.0%

Inadequate communication, I rarely know about new developments and reviews.

25.0% 32.4% 39.4%

Not sure 10.8% 9.2% 17.0%

Red Tape Survey 2009, Communication effectiveness of Federal, State (NSW) and Local Government

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Reducing Red Tape

Almost one-half (46.5%) of businesses consider that there is an opportunity to streamline reporting and reduce its burden on business operations. Key contributors to red tape are growth in the volume of regulation and the frequency of reporting requirements. Over one-fifth (21.8%) of surveyed businesses highlighted that reducing the frequency of reporting requirements would have the greatest impact in reducing the cost of compliance. The three most highly ranked measures for reducing the cost of compliance 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.

The respondents have ranked the level of red tape in dealing with regulatory authorities. Over three-fifths (68.7%) believe that the Australian Taxation Office has moderate to high level of red tape followed by Workcover Authority (53.2%) and Local Councils (52.1%). On a positive note, these numbers have decreased slightly since the 2008 survey.

Opportunity to streamline reporting Response

Yes 46.5%

No 11.3%

Not sure 42.2%

Red Tape Survey 2009, Opportunity to streamline reporting and make it less of a burden on business

Measures to reduce cost of compliance Response

Reduce the frequency of reporting requirements to a minimum. 21.8%

Agencies sharing information and making sure there are no duplicate information requirements.

20.4%

Better communication and consultation with businesses when developing new regulations.

19.7%

Establishment of a web-based reporting 19.6%

One agency which collects all the required information 16.9%

Not Sure 1.6%

Red Tape Survey 2009, Measures that would have greatest impact on reducing the cost of compliance

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Regulatory Authority High Moderate Low N/A

Australian Taxation Office (ATO) 20.8% 47.9% 29.7% 1.6%

Australian Securities and Investment Commission (FED)

11.5% 28.1% 35.9% 24.9%

ACCC (FED) 7.3% 12.5% 14.1% 66.1%

AQIS (FED) 9.9% 13.5% 8.3% 68.2%

DEEWR (FED) 13.5% 24.5% 24.0% 38.0%

Office of State Revenue (NSW) 9.4% 29.7% 32.3% 28.6%

Office of Fair Trading (NSW) 7.8% 25.0% 46.9% 20.3%

Office of Industrial Relations (NSW) 14.6% 26.6% 33.3% 25.5%

Workcover Authority (NSW) 14.1% 39.1% 36.5% 10.4%

Department of Planning (NSW) 10.4% 15.6% 11.5% 62.5%

Food Authority (NSW) 5.7% 9.4% 8.9% 76.0%

Department of Environment, Climate Change and Water (NSW)

7.8% 9.9% 18.2% 64.1%

Local Councils 22.9% 29.2% 26.0% 21.9%

Red Tape Survey 2009, Level of red tape in dealing with various regulatory authorities

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Appendix I – Respondents in Detail

Respondents by Number of Employees

Number of Employees Percentage of Respondents

1 to 4 19.7%

5 to 9 30.0%

10 to 19 20.4%

20 to 49 11.5%

50 to 99 13.2%

More than 99 5.3%

Respondents by Industry – top 10

Industry Percentage of Respondents

Manufacturing 20.7%

Other Services 14.2%

Retail Trade 12.3%

Wholesale Trade 11.8%

Professional, Scientific and Technical Services 10.3%

Construction 8.7%

Health Care and Social Assistance 7.0%

Agriculture, Forestry, and Fishing 7.0%

Financial and Insurance Services 6.5%

Accommodation and Food Services 6.3%

Contact:

Aldina Aljukic, Policy Officer (Policy and Advocacy)

Email: aldina.aljukic@nswbc.com.au

Telephone: 02 9458 7576