Businesses' Views on Red Tape : Administrative and Regulatory Burdens on Small and Medium-sized Enterprises

Businesses’ Views On Red Tape Provides The First Opportunity To Systematically Compare Data Across 11 Oecd Countries. The Data Show How Small And Medium-sized Enterprises Perceive National Administrative And Regulatory Costs. Regulations And Government Formalities, So-called Red Tape, Are Important Tools Used By Governments To Carry Out Public Policies In Many Policy Areas, Including Safety, Health, And Environmental Protection. However, If They Are Poorly Designed Or Applied, Inefficient, Or Outdated, They Can Impede Innovation, Entry, Investment, And Create Unnecessary Barriers To Trade, Investment, And Economic Efficiency. The Result Of Poor Regulation And Formalities Is That National Economies Become Less Able To Grow, Compete, Adjust, And Create Jobs. Based On A Survey Of Almost 8 000 Businesses, This Report Assesses The Quality, Application And Burdens Of Employment, Environment And Tax Regulations And Formalities. The Results Are Dramatic: For Example, Red Tape Accounts For 4% Of The Annual Turnover Of Companies, While The Hardest Hit Are The Smallest Companies, And These Costs Are Growing In Most Countries. Executive Summary -- I. Introduction -- The Importance Of Regulatory Burdens -- 2. The Difficulties Of Measuring Regulatory Costs -- 3. Oecd Work On Measuring The Compliance Costs Of Regulations -- 4. The Limitations And Advantages Of Large-scale Business Surveys -- 5. Main Characteristics Of The Oecd Business Survey -- Ii. Results From The Survey -- -1. Direct Administrative Compliance Costs -- 2. Indirect Costs -- 3. Quality Of Regulations And Formalities -- 4. The Quality Of Regulatory Administration -- Iii. Conclusion -- Appendix I. Detailed Description And Results Of The Survey -- Appendix Ii. Comparison With Other Surveys And Studies -- Appendix Iii. The Survey Questionnaire -- Appendix Iv. Additional Data Used For The Cost Estimates -- Appendix V. Analysis Of Variance Results Among Policy Areas, Countries, Industries, And Firm Structures -- Appendix Vii. Detailed Tables Of The Survey's Results -- Appendix Viii. Economic Sectors Used In The Survey Samples Includes Bibliographical References (p. 125-127). Foreword Table of Contents Executive Summary I. Introduction 1. The importance of regulatory burdens 2. The difficulties of measuring regulatory costs Box 1. Main categories of regulatory burdens 3. OECD work on measuring the compliance costs of regulations and formalities: the launching of a... 4. The limitations and advantages of large-scale business surveys Box 2. Approaches to measuring administrative compliance costs 5. Main characteristics of the OECD Business Survey Table 1. Size of the sample and response rate by country and by regulatory area II. Results from the Survey 1. Direct administrative compliance costs The results from the OECD survey show that administrative compliance costs are substantial and economically significant There is also a disproportionate impact on smaller companies Figure 1. Aggregate annual compliance costs – average per SME per country Figure 2. Aggregate compliance costs – average per employee per firm by country Figure 3. Aggregate annual administrative costs by regulatory area – average all countries Box 3. Some causes of the “regressive” impact of administrative compliance costs on SMEs Figure 4. Annual administrative costs per employee by company size – average all countries Figure 5. Effect of company size and sector on per-employee compliance costs for environment reg... Some service sector companies experienced a higher level of administrative compliance costs than did manufacturing companies Administrative compliance costs represented a significant proportion of companies’ revenues Figure 6. Aggregate total annual administrative costs by economic sector – average all countries Figure 7. Annual administrative costs per employee by economic sector – average all countries Figure 8. Total administrative compliance costs as a percentage of annual turnover by country In summary, administrative compliance costs represented a significant proportion of economic resources Figure 9. Economy-wide SME costs of regulatory administrative compliance as percentage of busine... These costs were likely to be an under-estimate Companies believed that administrative compliance costs were increasing The results from the survey are consistent with those from previous studies... ... and variance analysis shows that the impact on SMEs of the regulatory framework inside a country varied significantly in terms of policy areas and business size Figure 10. Perceived changes in compliance costs for each area of regulation 2. Indirect costs Indirect costs are important because they affect the ability of companies to innovate, operate efficiently, and adjust to changes over time Figure 11. Average annual compliance costs per employee, by country and regulatory area The survey shows that most SMEs believed that employment regulations created indirect costs for them Figure 12. Indirect costs of employment regulations – average all countries 3. Quality of regulations and formalities Regulatory quality – efficiency, transparency, and simplicity – affects the level of direct and indirect costs that companies must incur to comply with regulations The survey shows that many SMEs were critical of the quality of regulations Figure 13. Quality of regulations – average all countries Levels of compliance with regulations were perceived by SMEs to be moderate to high Figure 14. Perceived levels of compliance by type of regulation – average all countries 4. The quality of regulatory administration SMEs were critical about the quality of administration when they sought information from government offices Figure 15. Ease and consistency of information on regulations – average all countries SMEs were even more critical about the quality of administration when seeking decisions from government offices Figure 16. Efficiency and ease of obtaining administrative decisions – average all countries Good regulatory administration is important because SMEs made an average of eight requests for authorisations or decisions every year Figure 17. Annual number of requests for permissions per firm per regulatory area – average all ... Figure 18. Annual number of requests for permissions per employee per firm per regulatory area –... III. Conclusion Appendix I. Detailed description and results of the survey 1. Survey methodology 1.1. The objectives 1.2. The scope of the survey 1.3. The Questionnaire 1.4. The sample 1.5. The fieldwork 1.6. The response rates and consistency of results Figure 19. Survey sample sizes, by country Figure 20. Survey sample sizes, by size of firm Figure 21. Survey sample sizes, by economic sector Figure 22. Indicator of the firm’s economic performance two years prior to the survey 2. The administrative cost of compliance 2.1. What is meant by administrative compliance costs? 2.2. The approach taken by the survey 2.3. Main findings Figure 23. Total compliance costs – average per firm per country Figure 24. Ratio of internal to external compliance costs, by policy area and by country Figure 25. Total compliance costs as a percentage of turnover by firm size 2.3.1.Differences between companies of different sizes Figure 26. Share of total costs, by regulatory area by country 2.3.2.Differences between companies in different sectors Figure 27. Annual administrative compliance costs – average per employee by company size and by ... Figure 28. Annual administrative compliance costs – average per firm by economic sector and country 2.3.3.Company perceptions of changes in administrative compliance costs Figure 29. Perceived changes in tax compliance costs over the two years previous to the time of ... Figure 30. Perceived changes in employment compliance costs over the two years previous to the t... Figure 31. Perceived changes in environmental compliance costs over the two years previous to th... 2.3.4.The Economy-Wide Impact of administrative compliance costs Figure 32. Main reasons for the increase in the compliance costs with regulations – average all ... Figure 33. Main reasons for the increase in the compliance costs with regulations, by country Table 2. Estimated annual administrative compliance costs in US dollars for all firms with 1 to ... 3. Indirect Costs for companies 3.1. Approach taken by the survey 3.2. Main findings 4. The quality of regulations 4.1. The approach taken by the survey Figure 34. Indirect costs created by employment regulations, by question and by country Figure 35. Perceived impact of employment regulations on the need for full-time workers and temp... 4.2. Main findings 4.2.1.The quality of regulations Figure 36. Quality of tax regulations – average all countries Figure 37. Quality of tax regulations – Questions which received the highest rate of disagreemen... Figure 38. Quality of employment regulations – average all countries Figure 39. Quality of employment regulations – Questions which received the highest rate of disag... Figure 40. Quality of environment regulations – average all countries Figure 41. Quality of employment regulations – Questions which received the highest rate of disa... 4.2.2. The level of consultation Figure 42. Percentage of SMEs that agreed with the question: “Is the process of developing new r... 5. The quality of regulatory administration 5.1. The approach taken by the survey Figure 43. Perceived levels of compliance among firms, by type of regulation Figure 44. Perceived levels of compliance among firms, by size of firm 5.2. Main findings 5.2.1.The quality of administration – When seeking information from government officials Figure 45. Effectiveness of information on employment regulations – average all countries Figure 46. Effectiveness of information on tax regulations – average all countries Figure 47. Effectiveness of information on environmental regulations – average all countries 5.2.2.The quality of administration – When seeking decisions or permissions from government officials Figure 48. Obtaining decisions or permissions on employment regulations – average all countries Figure 49. Obtaining decisions or permissions on employment regulations – Questions which receiv... 5.2.3.The number of authorisations required Figure 50. Obtaining decisions or permissions on tax regulations – average all countries Figure 51. Obtaining decisions or permissions on tax regulations – Questions which received the ... Figure 52. Obtaining decisions or permissions on environmental regulations – average all countries Figure 53. Obtaining decisions or permissions on environmental regulations – Questions which rec... Figure 54. Average number of requests for permissions made annually per firm and regulatory area Appendix II. Comparison with other surveys and studies 1. On the administrative compliance costs per company 2. On the administrative compliance costs per employee Box 4. Administrative compliance costs in the Netherlands 3. On the impact of the administrative compliance costs on the economy 4. On indirect costs Box 5. Research projects in the car assembly industry Box 6. A survey of the industrial cleaning sector Box 7. Impact of regulatory quality on the competitiveness of Europe’s Animal Health Industry 5. On the quality of administration Box 8. A detailed assessment of environmental regulations Box 9. Time needed to obtain a permit and build a new petrol station (number of days) Box 10. Licence enforcement – Benchmarking Australia’s performance Appendix III. The survey questionnaire 1. Organisation for Economic cooperation and Development (OECD), Government sponsor, Business re... Section A: Company details A 1. What is the main economic sector your business operates in? (Please tick one box only) A 2. How many employees did you have at the end of January1998? A 3. How long has your business been operating? (Please tick one box only) A 4. What was your business’ last annual gross turnover? (Please provide your answer in local cur... A 5. Does your business have full or partial foreign ownership? (Please tick one box only) A 6. Over the past two years, what has happened to the performance of your business in the follow... A 7. Indicate the name of the State or Province where your firm (or site for a large firm) is loc... Section B: Quality of employment regulations B 1. Thinking about Employment regulations as a whole, do you agree or disagree with the followin... B 2. In your opinion, is the process of developing new regulations usually such that affected bus... B 3. In your opinion, what is the general level of compliance with Employment regulations among t... Section C: Quality of administration of employment regulations C 1. Thinking about your contacts with government offices TO OBTAIN INFORMATION about Employment ... C 2. Thinking about your contacts with government authorities TO OBTAIN DECISIONS OR PERMISSIONS ... C 3. During the past year, how many separate decisions or permissions did your business request f... C 4. Thinking about the impact of complying with all Employment regulations, estimate on a five p... C 5. In your opinion, how have the compliance costs of Employment regulations affected the follow... Section D: Administrative compliance costs of employment regulations D 1. How many hours are spent on an average month by staff and management in your business comply... D 2. Have you bought in the past year computers or software to mostly help you to comply with Emp... D 3. How much money does your business spend during an average month on hiring OUTSIDE services t... D 4. Please estimate on a four point scale the administrative compliance costs of Employment regu... D 5. In your opinion, how have administrative compliance costs that result from Employment regula... D 6. What is your estimate of the administrative compliance costs of Employment regulations on yo... Appendix IV. Additional data used for the cost estimates Table 1. Small- to medium-sized business populations in the survey Table 2. External 1998 data used in analyses Appendix V. Issues concerning non-response/no opinion to questions and confidence intervals on qualitative qu... Table 1. Qualitative questions with high rates of non-response or no opinion Table 2. Confidence intervals for answers to qualitative questions Appendix VI. Analysis of variance results among policy areas, countries, industries, and firm structures Table 1. Factors that affect the administrative costs of compliance of companies by regulatory area Relationships between administrative cost and policy areas Relationships between administrative costs and size of firms Figure 1. Average annual compliance costs per employee by economic sector and regulatory area – ... Figure 2. Average annual compliance costs per employee by firm size and regulatory area – averag... Relationships between administrative costs and a “Country” regulatory framework Figure 3. Average annual compliance costs per employee by country and regulatory area Table 2. Groups of countries according to the cost per employee of employment regulations Interaction between administrative costs and the different factors (policy area, size of firms, “... Figure 4. The interactive effect of company size and economic industry on per employee complianc... Figure 5. The interactive effect of company size and country on per employee compliance costs – ... Model definition and ANOVA results Table 3. ANOVA results Appendix VII. Detailed tables of the survey’s results Table 1. Main reasons for the increase in the compliance costs with regulations by country Table 2. Indirect costs created by Employment regulations – by question and by country Table 3. Questions on the quality of regulations – by regulations and by country – Percentage of... Table 4. Questions on the quality of administration or regulations by regulations and by country... Table 5. Questions on the quality of contacts with government authorities to obtain decisions or... Appendix VIII. Economic sectors used in the survey sample Table 1. Manufacturing (industry) and resource oriented activities Table 2. Services with important impacts on the environment Table 3. Services without important impacts on the environment Notes