Report in Compliance cost of SMEs in New Zealand

Essay by kevin2004 July 2004

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1. Introduction

This report presents the result of analyzing the article a small operator's guide to red tape and also presented investigations of reducing compliance cost in order to help SMEs to remove the barrier.

Compliance requirements are essential to safe and healthy workplaces and stable successful businesses. But when the law is too complex or difficult to understand or comply with, it can often be ignored. Making compliance simpler and more effective is the way of helping SMEs to their future success.

This report also gives out recommendations on reducing the compliance costs to benefit both business and government.

2. Discussion

2.1 What are compliance costs?

Compliance costs are the administrative and paperwork costs that business incur when meeting an obligation imposed by (Ruth, W.,2000).

They include administrative burdens and all other associated compliance cost, such as equipment purchase; retooling, recurrent production costs, buying in specialist service, staff training and monitoring compliance.

2.2 Compliance costs in SMEs

SMEs are defined as businesses employing 19 or fewer employees, and they represent 97% of all New Zealand companies, employ 43% of all employees and produce 39% of all the goods and services. (Alan Cameron& Claire Massey, 2003) Therefore, SMEs make a huge contribution to New Zealand.

Ministry of Economic Development research shows that of all new businesses started in 1995, with five or fewer full-time employees, only 27.4% remained active last year. Just 55% were still in business after only two years of operation (Ministry of Economic Development, 2001). A very clear message that National Bank received from business was that some compliance costs have already become a barrier for SMEs to growth.

2.3 Barrier to Business Growth

Many economists advised that regulation created compliance costs in terms of resources, energy, money and time. There is a huge number...