Regulatory Compliance Costs - an Important Issue for Government
Any decision about regulatory change or intervention requires careful consideration of the expected costs and benefits. Almost all regulation will have some costs. These costs need to be weighed up against the objectives and expected benefits of regulation - both over the short and the long-term. The benefits can be wide-ranging (e.g. economic or social) and may accrue to business, consumers, the New Zealand economy or society as a whole.
Compliance costs (the "red tape" costs of meeting regulatory requirements) are one of the important costs factored into government decisions about whether to regulate or whether to alter regulation. In addition to the requirement to prepare Regulatory Impact Statements (RISs), government departments are now required to prepare Business Compliance Cost Statements (BCCSs) where advice supporting regulatory change will have compliance cost implications for business. Furthermore, when regulation is seen as the best available option, the government still seeks to ensure compliance costs are minimised.
A number of international studies have confirmed that the burden of regulation and compliance costs on business in New Zealand is light relative to other developed countries. For instance, in its 2002 Economic Survey, the OECD commented that "the quality of government regulations and their administration in New Zealand is generally high by international standards." The 2003 Index of Economic Freedom, published by the Heritage Foundation and the Wall St Journal, noted that "it is easy to establish a business in New Zealand", and described the regulatory regime as "relatively light" and "transparent".
Nevertheless, improvement of the regulatory framework for business remains a key focus for this government, as evidenced by its extensive programme of regulatory reform - which has included amendment of the Commerce Act and associated competition regulations, introduction of the Takeovers Code, a review of insider trading laws, and introduction of the Securities Markets and Institutions Bill - to name a few.
As part of this wider programme of regulatory improvement, the government has undertaken several initiatives focused specifically on reducing compliance costs for business. These include:
- Ministerial Panel on Business Compliance Costs Review - the government has implemented many of the wide-ranging 162 recommendations submitted by the Panel.
- Tax Simplification Programme - the government's ongoing programme to make tax compliance easier for SMEs.
- Increased resourcing of the Environment Court - several million dollars of funding over the past two to three years has seen noticeable reductions in Environment Court delays and backlog.
- Business Law Reform Bill - an omnibus Bill that makes amendments to a wide range of commercial law statutes with a focus on compliance cost reduction.
- Electronic Transactions Act - which, by providing improved and clarified legal status for electronic information, will reduce compliance and transaction costs for business.
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