Strangled by red tape

By JIM EAGLES business editor

Smaller businesses are the worst hit by Government red tape, according to a survey by the Auckland Chamber of Commerce.

The survey, based on an exercise regularly conducted by the Australian Chamber of Commerce, found that proportionately the smallest firms devote 20 to 30 times more of their resources to compliance issues than major businesses.

Worst hit are owner-operators with no staff, who have to spend an average of 172 hours a year on regulatory requirements.

Firms with one to five staff are burdened with having to put an average of to 86 hours per employee into compliance matters.

The burden is proportionately less for firms with 6 to 20 staff (26 hours per employee) and 21 to 99 staff (14 hours per employee).

The biggest firms, employing 100 staff or more, spend more time in total on red tape, an average of 351 hours a year, but that amounts to just 3 hours per employee.

Chamber chief executive Michael Barnett said the survey showed that red tape was a major reason many small firms never reached their potential.

"In the case of small businesses this work usually has to be done by the owner and it diverts them from actually growing the business," he said.

"As a result, the energy and enthusiasm, which should be going into developing a business idea, gets sidetracked into just meeting the requirements and keeping the business ticking over."

The survey of 800 chamber members confirmed that tax matters were by far the most time-consuming area of compliance for all businesses.

It found that for just about every category of business the burden of doing GST, fringe benefit tax, company tax and PAYE made up two-thirds of the time spent meeting Government requirements.

GST took the most time with company tax close behind. Fringe benefit tax was a bigger issue for larger companies and PAYE was a lesser problem.

Tax is particularly burdensome for the smaller firms. For example, two-thirds of businesses employing one to five staff said they spent one to two hours a fortnight on PAYE, the same amount of time reported by a third of firms employing more than 100 staff.

Barnett said the results confirmed the need for something to be done about the huge burden imposed on businesses by their role as tax collectors for the Government.

"Business is waiting eagerly for the discussion document on simplifying tax which the Government has promised next month," he said.

"When the paper comes we hope it will do more than just tinker with the problem or use tax money to pay someone else to do the paperwork.

"What is required is fundamental change, not just paying lip service to the problem."

The survey showed that other areas of compliance, such as workplace health and safety, or industrial relations, varied sharply from firm to firm.

Many businesses reported few problems in those areas but those that had been involved said they were very time-consuming.

* Just under half the businesses in the survey said they had been involved with OSH issues in the past fortnight. Of those, 65 per cent said it took them 5 hours and 13 per cent said they had been obliged to spend more than 15 hours on those issues.

* Only a quarter of companies had been involved in an unfair dismissal case in the past year. Where problems had arisen, 58 per cent said they occupied more than 15 hours and 17 per cent said it took over 50 hours.

* Employment agreements are mainly an issue for larger companies and the survey suggests that they do take time. Just under half of the business with over 100 staff said they had spent more than 100 hours on employment agreements.

* Organising insurance cover is time-consuming for most respondents and 87 per cent said they had spent up to 15 hours dealing with insurance. Three per cent said they had no insurance cover at all.

Barnett said that in some cases "the time spent by small-medium businesses on issues such as dismissal and renewing insurance are horrific and appear out of all proportion to the size of their businesses".