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Business New Zealand-KPMG Compliance Cost Survey

Business New Zealand-KPMG Compliance Cost Survey

"Yet another study has shown that the burden of regulation is increasing in New Zealand and making business operation more difficult", the executive director of the New Zealand Business Roundtable, Roger Kerr, said today.

Mr Kerr said that the findings of the Business New Zealand-KPMG study were consistent with those of the Ministerial Panel on Business Compliance Costs which reported two years ago.

Key problem areas identified were tax, health and safety regulations, the Employment Relations Act, ACC and the Resource Management Act.

"Regrettably, the government's response has been that all these areas are essentially off limits", Mr Kerr said. "Yet no serious inroads on the problems can be made unless they are addressed in fundamental ways.

"For example, the government's commendable efforts at tax simplification are thwarted by the complexities introduced by the increase in the top tax rate to 39 percent which required another 47 pages of tax legislation. Only moves towards a lower and flatter tax scale, as the McLeod Review recommended, can reduce the problem."

Mr Kerr added that private sector compliance costs are only the tip of the iceberg. Resources are also consumed by the bureaucracies that have to administer regulations. More important still are the economic costs of regulation, such as the disincentive or deadweight costs of taxation and the distortions to resource use resulting from regulations. For example, gaining a resource consent under the RMA may involve high compliance and administration costs but where the Act prohibits or deters development completely, the economic costs may be much higher.

"The government should not be surprised by these findings", Mr Kerr said. A study undertaken last year by Hon Jim Anderton's department found that:

With the exception of business law, regulation is considered to have a detrimental impact on the way that firms conduct business. In particular, industrial relations related regulation (ACC and employment law) and regulation associated with local government (RMA and local authority regulations) were identified by firms as negatively impacting on performance.

"The study also noted: Rather surprisingly, small firms were under-represented in responding that certain regulations had a negative impact upon their business compared with larger firms.

"It is possible that many larger firms go to greater lengths to comply with regulations than smaller ones, which are often unaware of them and escape the attention of the administering bureaucrats.

"There is no way the government will achieve its goal of returning New Zealand to the top half of the OECD income rankings unless it faces up to the need for changes in 'no go' areas", Mr Kerr concluded.

"Right now it is planning to impose even more regulation under the Employment Relations Act. Only a basic change in direction and stronger constraints on regulation along the lines of those recommended in the NZBR study Constraining Government Regulation will reduce the overall regulatory burden and spur faster growth."

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