From the Australian
SMALL BUSINESS Peter Switzer
November 28, 2006
AN international report has ranked Australia No2 when it comes to small business, while a local expert on regulation says the tax office is not as bad as we think. Wonders will never cease!
Angela MacRae advised the Prime Minister’s Department on the GST and was a member of the Reducing Regulatory Burdens on Business taskforce, chaired by Gary Banks of the Productivity Commission.
“We were surprised that the tax office does a lot better than many other regulators,” she told a Standards Australia conference in Sydney last week.
“The ATO is often a good role model.”
However, she was less charitable about the tax laws.
“Our tax act is the second-worst in the world behind the US,” she said.
The latest Sensis business index for small and medium enterprises showed confidence in the sector has improved in the three months to November, despite a 0.25 per cent interest rate hike earlier this month.
The past six months have brought a depressing run of confidence ratings for small and medium-sized enterprises. Confidence is measured by taking away the worried businesses from the confident. Net confidence is now at 50 per cent, up 5 percentage points over three months.
However, it is 9 percentage points lower than for February.
“The main reasons businesses gave for feeling confident were that they had plenty of work coming up, they were established and experienced and they were currently experiencing a good level of profitability and improving business,” the report says.
The drought’s effect on prices and the economy generally were big worries for business.
SMEs said finding and keeping staff (14 per cent) was top of the list, followed by lack of work (11 per cent), cash flow (11 per cent) and paperwork and bureaucracy (9 per cent). Fuel costs (4 per cent) and taxes (3 per cent) also rated.
Despite this, a recent World Bank study, Doing Business 2007, ranked Australia as the second-easiest country in the world in which to start a business. It was also No2 in the OECD for obtaining credit and hiring new workers.
New businesses in Australia need only two steps and two days to get going, against the OECD average of six steps and 16 days.
Small Business and Tourism Minister Fran Bailey said: “The World Bank confirms that Australia is a great place to start and run a small business. The Howard Government has made life easier for small business by delivering strong economic management, cutting taxation and reducing red tape.”
The panel at the Standards Australia event, however, did not see the red-tape situation in such glowing terms.
Australian Chamber of Commerce and Industry chief executive Peter Hendy referred to an ACCI finding that 74 per cent of businesses were concerned about the costs of regulation.
“It cost the economy 10.2 per cent of GDP, or $86 billion,” he said. “Our concern is the cost of regulation outweighs the actual threat to the community.”
MYOB founder Craig Winkler said his SME surveys confirmed that the sector was dogged by excessive and unreasonable regulation.
Ms MacRae said the federal Government’s response to the 178 recommendations of the banks’ taskforce took longer than was needed to compile the report.
And while 158 of the 178 recommendations were accepted by the Government, only 15 per cent were immediately acted on. Experts say this shows something about politicians’ resolve and underlines how difficult red-tape reduction can be.
Another panelist, Peter Kell, who heads consumer watchdog Choice, pointed to the pluses of regulation.
“There are regulations that simply are necessary,” he said. “But good regulation should be aimed at making markets work more efficiently.”
John Martin, the small business commissioner for the Australian Competition and Consumer Commission, was critical of those who call for less regulation.
“They could be throwing the baby out with the bathwater,” he said. “In the case of franchising, we could be soon seeing more regulations, when 98 per cent of franchising is working fine.”
Roger Wilkins, who spent 15 years advising the NSW government at the highest levels and now works for Citigroup, says global competition pressures mean we have to look at the costs of poor regulation. While he believed we compared well with other countries, he was critical of the unwillingness of governments to do independent cost-benefit analysis of regulation.
“Politicians have a fundamentally different view to risk than the rest of us,” he said. “We need a more transparent process.”
One bank taskforce recommendation that the federal Government did not take up was the idea of a ministerial champion who would prowl around the regulators, making them accountable and, dare I say it, sensible. And that’s the point – we need a dedicated, smart minister to KO dumb regulations.
Christmas proves the point each year, as accounting firms such as KPMG inform us what can and can’t be claimed at this year’s Christmas party. The news is good this year.
“From April 1, 2007, the fringe benefits tax exemption for minor benefits provided on an irregular basis will be lifted from $100 to $300 per employee,” it says.
The fact that there are six big lessons for Christmas parties this year shows how over-regulated we are and why too many business owners are in desperate need of a drink.