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Small Business Sector Crushed By Compliance Cost

12 September 2004

Media Release

NZ’s Small Business Sector Crushed By The Cost Of Compliance

A red tape survey conducted by the Auckland, Wellington and Otago Chambers of Commerce confirms that small-medium businesses (SME’s) are being crushed by the burden of compliance with no obvious relief in sight, reports Michael Barnett, Chief Executive of the Auckland Chamber of Commerce.

The survey reveals that the smaller the firm, the more time per employee is spent on red tape and compliance.

For example:

- Firms with between 1 and 5 staff spend 41 hours annually per employee on red tape and compliance issues.

- Firms with between 6 and 20 staff spend 15 hours annually per employee on red tape and compliance issues.

- Firms with between 21 and 99 staff spend 9 hours annually per employee on red tape and compliance issues.

On this basis, a firm with five staff spends 205 hours annually on red tape and compliance, while a firm with 25 staff spends just 225 hours annually on the same issues.

The detail of the survey reveals that while owner operators of small firms try to do all the compliance and red tape tasks themselves, a larger firm of 20 staff or more tends to hire a staff member to do this work or it is outsourced.

A feature of the survey findings was that firm size makes little difference in respect of time spent preparing and submitting GST and company tax returns.

Typically businesses spend 15 hours a year completing and submitting GST returns whether they are self employed or have a staff of 100.

Similarly the survey found that most firms spend 15 hours on company tax returns regardless of whether they are self employed or have up to 20 staff.

Commenting, Michael Barnett said that despite the strategies announced in 2001 by the IRD, and their statement in 2003 of streamlining and simplifying the tax processes, SMEs in NZ were yet to see any noticeable benefit in compliance cost savings.

On the issue of red tape and compliance generally, Mr Barnett said that it is like the sword of Damocles hanging over businesses. Once legislation is introduced, the compliance processes build on each other and if not responded to adequately, attract significant penalties.

He said that the Chamber generally agreed with the Small Business Advisory Group’s recommendations with regard to compliance issues and hoped that this survey would accelerate these and other plans to reduce the cost imposed on business by red tape and compliance.


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