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Cut the red tape, cut the green tape

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The big three areas of regulation are labour, taxation and green tape. If we can reduce the burden of these, the whole economy stands to reap the benefits. Innes Willox writes.

Red tape is a red hot issue. Ahead of the last Federal election, when we asked our members what the major issues were for them, the regulatory burden was in the top five.

And so it should be: for one reason or another, regulation is not something that Australia does well. And over the recent past we have been getting worse.

So, the Australian Industry Group is right behind the Commonwealth Government’s commitment to reduce regulatory burdens by $1 billion per year each year over the term of the parliament.

Two factors will be very important to the success of the assault on removing red tape.

The first is the willingness of the business community itself to step up to the mark to help identify major areas of red tape reduction and the solutions.

This is critical. Unless businesses buy into the process, we will get a top-down view of priorities and solutions. If we leave it to the bureaucrats to locate the problem areas and the ways they should be fixed we could well end up with the fox in charge of the hen house.

Second, to make really substantial headway across the business community, we will need to move beyond the fallen and low-hanging fruit and address the major areas of regulatory burden that impact on businesses.

The extent of the red tape burden facing Australian business is highlighted in a new Australian Industry Group (Ai Group) CEO survey.

Businesses in the survey rate the major areas of regulatory burden as:

Labour-related areas of regulation

  • 83% of CEOs who responded to the 2014 survey ranked the regulatory cost burden in these areas as medium or high.
  • These areas include industrial relations regulations as well as occupational health and safety.

Reducing duplication and improving harmonisation in OH&S laws has been sought by Australian business for many years, and it is still outstanding. Industrial relations regulation will be the subject of a forthcoming Productivity Commission inquiry. Reducing regulatory burdens must be a leading priority for this inquiry.

State and national tax compliance

  • Compliance costs associated with payroll and other state taxes was ranked as medium or high by 68% of CEOs while 64% ranked the compliance costs burdens linked to national taxes including company tax and the GST compliance (64%) as high or medium.
  • This is separate from the level of taxation that is imposed. In this area, business costs could be reduced by addressing onerous and repetitive reporting requirements, online access, and national inconsistencies across jurisdictions.

Reducing the costs of compliance and the distortions to business decisions must be a major focus of the Government’s foreshadowed taxation review.

Green tape regulating the environment, waste and energy

  • The regulatory burdens in these areas are a bugbear for around half of all businesses.
  • As with taxation compliance, onerous reporting requirements and regulatory inconsistencies across jurisdictions are frequently cited, but ‘green tape’ is often also characterised by lack of clarity, repetition, duplication and lack of consistency in regulatory requirements across agencies. A major clean-up is essential.

Singling out these areas should not be taken as meaning that we don’t also need to address the myriad specific regulations in areas such as infrastructure; planning; natural resources; transport; product safety; food safety; competition and fair trading.

Of course they should be addressed and, in fact, these areas are ripe for finding productivity and efficiency improvements that will bring cost savings to business as well as potential savings to Government.

But the big three areas of regulation - labour, taxation and green tape - are where the most impactful, economy-wide benefits from reducing burdens will be generated. These areas affect the vast majority of businesses and even small reductions in regulatory burdens will be spread across a very large number of businesses. They deserve a particular emphasis. 

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