Survey Results - Main Themes
The results of the survey reflect the perceptions of a small sample of the business community (and SME community) at a certain point in time - they are indicative only. Nevertheless, where there are consistent patterns or themes the results are a helpful indicator for both the government and policy-makers - particularly when added to other compliance cost research and existing knowledge of business compliance costs concerns.
The main themes of the survey's results are outlined below - both in terms of the main positive findings and the main perceived sources of compliance costs.
There will be a number of reasons why certain regulatory requirements are of particular concern to business, and the government takes these concerns seriously. MED will be working with other departments to gain a better understanding of the drivers behind the concerns identified in the survey. But in the meantime, departments have offered some preliminary comments. The purpose of the comments is not to dispute the perceptions, but rather to place them in context.
A series of tables containing the results of the different parts of the survey are contained in Appendix 1.
The "Positives"
In terms of overall findings, it was encouraging that in relation to most of the different areas of regulation addressed in the survey, the majority of respondents indicated that they "deal readily" with the compliance requirements. Size and firm experience will always be important factors in terms of a firm's ability to readily deal with its compliance requirements. However, the strategies and systems employed by firms are also very important. While the government will continue its efforts to reduce compliance costs, there is clearly also significant scope for businesses to learn from each other when it comes to compliance strategies.
Another very positive aspect of the survey results was the relatively low level of concern expressed in relation to regulatory requirements previously identified as areas of major concern to business.
In particular, the survey revealed that businesses tend to be less concerned with tax-related regulatory requirements (e.g. GST and PAYE requirements). This is a very positive result given a KPMG survey commissioned by the government in 1997, identified tax requirements as one of the most significant compliance cost concerns for business. In its report to the government in July 2001, the Ministerial Panel on Business Compliance Costs also noted that "businesses considered taxation their most significant business compliance cost."
This result can be credited to the ongoing efforts of the government to reduce tax compliance costs through its tax simplification programme and the efforts of IRD to make information more accessible.
The government is aware that tax-related compliance costs remain an issue for business, and its ongoing tax simplification programme is aimed at reducing this compliance burden, particularly for SMEs. A government discussion document, to be released later this year, will outline further proposals for simplifying tax for small businesses.
Likewise, the requirement to provide statistical information to government agencies was also identified as one of the main concerns in KPMG's 1997 survey. While some businesses still appear to consider the provision of statistics an unnecessary hassle (as mentioned above), it is encouraging that these concerns appear to have been reduced.
Other positives revealed by the survey include that many respondents recognised the benefits associated with fair trading legislation, the regulatory requirements relating to the hiring of new employees, and health and safety legislation.
Main Areas of Business Concern
Across the survey as a whole, respondents tended to express most concern with employment and workplace-related regulation, specifically:
- regulation applying to the release of an employee;
- ACC regulation; and
- health and safety regulation.
Business frustration with regulation relating to the dismissal of an employee may be somewhat expected given the ERA is designed to balance the power of the employer with the right of a worker to challenge the fairness of the employer's action. Furthermore, when the ERA came into force in October 2000 it was accompanied by a significant amount of adverse publicity about the problems some groups believed the ERA would cause. While many of the envisaged problems have not in fact materialised, this perception of the ERA has tended to linger.
On a positive note, the survey indicated that the pre-employment procedures stipulated by the ERA were generally considered to be helpful.
Changes to regulatory requirements introduced by the Health and Safety in Employment Amendment Act in December 2002, and the extensive debate surrounding its introduction, may also have impacted on the survey results.
ACC was also identified as an area of concern. Some of the survey respondents are likely to have been expressing frustration with ACC reforms (return to a single insurer), ACC policy (e.g. the lack of no claims bonuses), the actual cost of ACC insurance, or the cost of workplace safety initiatives, rather than strictly compliance costs.
It is worth noting that concerns about compliance costs stemming from employment-related regulation is by no means a New Zealand phenomena only. For instance, a working paper released last month by the Australian Productivity Commissioner, Mechanisms for Improving the Quality of Regulation: Australia in an International Context, reported that employment regulations account for more than one-third of business compliance costs across the OECD. The complexities of workplace relationships and the need to balance employer and employee rights are challenging issues to address from a compliance cost perspective.
The survey also revealed a degree of frustration with:
- RMA-related legislation;
- food and animal labelling requirements; and to a lesser extent
- regulation requiring the provision of data to government agencies (e.g. Statistics Act).
Almost all businesses are regularly required to meet tax-related regulatory requirements, and to a lesser extent employment-related regulatory requirements. By comparison, a much smaller proportion of businesses regularly encounter the RMA or food and animal labelling regulation. However, for those businesses that do, the survey revealed a degree of frustration.
It is perhaps unsurprising some businesses have expressed frustration with RMA legislation. SMEs, in particular, do not tend to employ people with experience/responsibility for environmental matters. Their awareness of, and capacity to deal with, RMA obligations are often, therefore, low.
Some of the present frustrations with the RMA may be partially explained by the fact that most discharges were able to continue ten years past enactment of the Act in 1991. This resulted in a high volume of applications for discharge consents around 2000/2001. The lengthy transitional period also meant that both transitional district plans (those prepared prior to 1991) and proposed plans (those prepared under the RMA) carried weight and jointly generated requirements for consent. The overall volume of consents appears to be dropping year on year as RMA plans replace transitional documents.
On a positive note, the majority of respondents felt that the benefits of compliance with RMA-related legislation exceeded or balanced the costs. Where the RMA is concerned, compliance generally reduces the likelihood of complaints, prosecution and negative publicity.
Concerns about food labelling requirements could be due to the introduction, on 20 December 2002, of a new Food Standards Code for all food sold in New Zealand (imported or New Zealand produced) covering composition (additives etc) and labelling. For health and safety reasons, and to protect the consumer, the government made a decision to impose this new Code. The new Code is comprehensive and does impose additional compliance costs, (particularly in labelling products) on importers and manufacturers.
The requirement to provide statistics to government departments (e.g. under the Statistics Act) does not appear to be one of the most significant sources of compliance costs to business. For instance, only 2% of respondents identified this requirement as that which most significantly "distracts and diverts" senior staff time. But at the same time, the survey revealed that a significant number of business still appear to see the requirement to provide these statistics as a diversion and an unnecessary hassle.
Businesses in the tourism and allied services industries (which were heavily represented in the survey sample) are likely to be frustrated with compliance costs imposed by the recent Accommodation Occupation Survey (although this was sponsored by the industry itself).
One of the other interesting findings was that respondents identified the tendency of regulatory compliance requirements to "distract and divert senior management time" as the biggest problem resulting from regulation. This is an important finding from a firm growth and innovation perspective.
Obstacles to Exporting
In addition to the specific focus on business perceptions of compliance costs, a sample of exporters was asked to consider the extent to which a variety of factors acted to restrict or slow their export growth (e.g. distance to markets, difficulty acquiring overseas representation). This provided an understanding as to how exporters perceive regulatory requirements as a constraint relative to other obstacles. Interestingly, the factor identified by the largest number of respondents (63%) as being a constraining factor was foreign regulation/conditions. 55% of exporters indicated that New Zealand's regulatory requirements were, at least to some extent, a factor inhibiting the growth of their export business.
Perceptions of Change over Time
Survey participants were also asked to indicate how the time and effort required to comply with government regulations has changed over the last two years. 55% indicated that requirements have increased. 40% said they have stayed much the same. Interestingly, respondents that felt there had been an increase were more likely to be from firms that were contracting, and from the food and primary sectors. These perceptions may at least be partially explained by the recent changes to accident insurance, employment relations, health and safety, and food safety legislation. These findings highlight the fact that compliance costs do remain an important issue for business.
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