Productivity Commission report calls on regulators to leave small businesses alone

Regulators need to better understand the plight of small business and realise SMEs are strapped for time when it comes to catching up with new laws and regulation, a Productivity Commission report has warned.

Small business owners and advocates continually complain about regulatory burdens. The report has reinforced their pleas.

“One of the things we’ve found across all regulators is they have relatively little understanding about the costs they impose on small business,” commissioner Warren Mundy told SmartCompany this morning.

“One of the things we’re suggesting here is making an effort to understand those.”

The draft of the Regulator Engagement with Small Business Report was released today, and contains several recommendations for how regulators can better interact with small business and relieve compliance burdens.

Among its recommendations, the commission said regulators can be more responsive to small business needs, specifically by using industry associations to gather information already collected by businesses.

“There is scope for increased targeting of those businesses and activities which present a higher risk to communities, and for adoption of lesser compliance cost approaches for lower risk businesses,” it also said.

The commission also said regulator discretion in compliance monitoring is required, and more widespread use of formal cooperation agreements between regulators could help minimise the “overall interaction burden”.

The report even suggests governments should require regulators to report against engagement principles and ensure low-cost mediation services for resolving disputes.

It also suggests governments should take into account any impact on business when creating new regulation.

“Certainly over time, the business community has said large regulators such as the Tax Office and others have gotten better,” says Mundy.

“But there are an awful lot of small regulators, such as local councils, which have an awful lot to do with small businesses…which have issues.”

Mundy says there is a consistent problem among small regulators, in that they can often forget about the impact on specific individuals from regulation.

“There is a real tendency not to think about the circumstances of a small business,” he says.

“Most small businesses tell us a lot of their effort for compliance is done after hours, at home.”

“Unlike large companies, businesses don’t have the time and resources to work on how to make their compliance easier.”

Part of the problem, Mundy explains, is a risk-averse culture has developed among regulators and they less regularly consult with business.

Instead, regulators should start focusing on businesses which pose a greater risk if they break laws and relieve the burden on smaller businesses.

“Most small businesses in the vast bulk of circumstances pose relatively little risk.”