Speech to the Elected Council of the Employers and Manufacturers Federation (Central) AGM
CommerceThank you for the invitation to speak to you today.
You have asked me to talk about compliance cost issues for enterprises and the role of information technology.
It is a timely request because in less than a week we will be delivering the government’s final response to the business compliance cost panel’s recommendations. And also because it is just over a year since the government launched its e-commerce strategy - I recently delivered a progress report on that strategy.
One of the drivers for the e-commerce strategy is the goal of building an inclusive and innovative economy for the benefit of all New Zealanders. In fact this goal drives our business, industry and regional development programmes.
The government believes in taking a smart, active role in its relationship to business. We believe in working in partnership with business and the community to achieve economic success. We are working with business to find solutions to problems.
This approach is reflected in the way we have tackled reduction of compliance costs and our work programme on e-commerce.
Compliance costs
Past governments have talked about reducing compliance costs for years, but little has been achieved. We are serious about tackling compliance costs for business.
We have recognised that compliance costs are particularly important to small businesses - the costs they face are often the same as those faced by bigger businesses – but they have neither the time nor resources to tackle them.
Governments need to set rules. That is how we meet the economic, social and environmental goals the community expects of us. Good quality regulations are necessary for a healthy economy and for economic growth.
The key is to find a balance between the cost of compliance and achieving those goals. Businesses should not face higher costs than is necessary.
In October 2000 the government made a commitment to reducing compliance costs. As part of this commitment we sought the advice of business on ways to reduce compliance costs.
A Panel of business people was appointed to provide us with that advice. It gathered the views of business through regional meetings, submissions, and meetings with sector groups and government agencies.
The Panel, chaired by Alan Dunn, reported back earlier this year. Their report was a clear and practical response to their brief and canvassed issues ranging from the Resource Management Act to ACC and work place safety.
Since July we have been considering the 162 recommendations made by the panel. We have considered each and every one of those recommendations. We have asked government departments to identify what things we could do to deal with the Panel’s concerns.
Many of the Panel’s suggestions are not big changes but small changes that when added together make a difference for business.
Early next week we will be releasing a report that will take every one of the 162 recommendations made by the panel and give a response to each. It will be broken down into four key areas:
·Recommendations that have already been done – for example establishing a test panel to look at proposals arising from the review of the Health and Safety in Employment Act.
·Recommendations that are relatively straightforward and could be done quickly – for example all of the Panel’s recommendations on the Building Act - including the issue of clarifying the distinction between 'building consent' and 'resource consents' - were incorporated into a discussion document on the Building Act.
·Those recommendations requiring more work – such as ensuring that business input is made earlier in the policy development process.
·And those recommendations that will not be implemented because they conflict with government policy – for example, levying the Fringe Benefit Tax at a single rate lower than the top marginal personal tax rate will allow high-income earners to avoid the top rate.
This response will also include a monitoring programme. Unlike other compliance cost studies the government will follow up to ensure that the things promised were done and to check that they made a difference to compliance costs.
Along with suggestions about particular legislation, the panel also wanted improvements in the way law is made. It wanted government departments to think about the impact of new laws on business before they are made.
We have already made a number of changes to the way we make laws. We will be consulting business early in the drafting of legislation and monitoring compliance costs through industry test panels.
We are also requiring departments to specify the costs to business of regulations by requiring that each new regulatory proposal be accompanied by a business compliance cost statement that discloses the ‘red-tape’ costs and that these statements be made public.
To help government agencies develop useful business compliance cost statements we have established a dedicated team, the Business Compliance Cost Unit, in the Ministry of Economic Development. This all helps to improve the process of transparent government and to focus us on reducing compliance costs for business.
In fact we have already seen a model example of this in the Motor Vehicle Sales Bill tabled in Parliament recently. The regulatory impact statement for that Bill shows that compliance costs for licensed motor vehicle dealers will fall due to the simplified registration regime. It is a practical demonstration of how serious this government is about implementing the Business Compliance Cost Panel’s recommendations.
Tax simplification
Complementary to my work on business compliance cost reduction as Commerce Minister, as Associate Revenue Minister in May I released the first in a series of discussion documents devoted to different aspects of tax simplification. "More Time for Business" looked at possibilities for simplifying the tax system from the perspective of small businesses.
"More Time for Business" presented new ideas to help businesses meet tax obligations as part of their normal business activity. In particular:
qProvisional tax: Small businesses could pay provisional tax to match cash flow, rather than paying it in three equal payments throughout the year.
qUse of money interest: Reduce interest costs by allowing taxpayers to pool provisional tax payments.
qEmployers and PAYE: Employers could reduce exposure to penalties and interest by using intermediaries such as payroll firms when collecting and paying PAYE.
qEnd-of-year tax adjustments: Requirements associated with end-of-year income tax calculations for small businesses, such as trading stock valuations, could be reduced.
qSimplifying requirements: Other forms and processes could also be simplified. They include exemption certificates for non-resident contractors' withholding tax and the resident withholding tax certificates sent out by financial institutions.
qBenefiting from information technology: Recent advances in information technology can help to reduce tax compliance costs by reducing the need for businesses to communicate with Inland Revenue, simplifying the calculation and payment of tax, simplifying the filing of returns, and improving the administration of the tax system.
We received generally supportive submissions from a wide variety of individuals and groups on this document - and there were many new suggestions on ways to simplify the tax system. We will be working through those new ideas to see what benefits they would create and see whether they are feasible.
Another area we have been working on is replacing the rules that provide relief to taxpayers in debt who face hardship. The current rules were developed in the 1930s and are deficient from both the perspective of taxpayers and that of an efficient tax administration. The proposed rules are intended to be fairer and clearer and to encourage taxpayers to deal with their debt problems early rather than letting them become insurmountable. These new rules will be introduced in the December Tax Bill.
Governments can design good regulations. We can provide easy to use guidelines on how to comply. And we can provide easy access to information. But the key to reducing compliance costs is business people such as yourselves using this information to your advantage.
It is one of our goals to make it easier for you to do that. A key plank of making it easier to access information from government is our e-commerce and e-government programmes.
Information Technology
One of the key themes in the Business Compliance Panel’s report was the need for access to better information on regulations. More information will make it easier for businesses to know what they have to comply and how they can do it. More accessible information will reduce the time and effort required finding information.
Business wants information that is clear, useful, easy to read and accessible 24 hours a day.
Information technology has the potential to be the tool to provide business with this. The Internet makes business information readily available.
The government is committed to the development of e-commerce and of e-government. We have an E-commerce Strategy that is one year into implementation. It identified three roles for government:
·Leadership and communication
·Building capability; and
·Ensuring an enabling regulatory environment.
Leadership
We believe that the government must lead by example. In this context the implementation of e-government is crucial. A comprehensive E-government Strategy has been developed and implementation of this is progressing well.
Our goal is that by 2004 the Internet will be the dominant means of enabling ready access to government information, services and processes.
Already many key business dealings with government can be carried out electronically, including customs processes, tax returns, personal property security registrations and company registrations.
There is vast potential for companies to reduce their compliance costs if they are able to deal with government and its departments online, eg: filing forms, paying tax, ACC and applying for resourcing consents.
We also believe that government has a key leadership role in communicating the importance of the changes that are taking place and their implications. To this end we have published information in hard copy and on the web, and have held a number of events in partnership with business that have showcased the opportunities.
Building Capability
Government also has a key role in building human and business capability. Lifelong learning is the key to wealth creation and improved economic and social performance.
The government is committed to:
·Building business e-commerce skills
·Working to ensure that all New Zealanders have access to life-long learning opportunities to develop ICT skills for the 21st century;
·And building broader ICT literacy and capability in the community
We believe that the private sector has a vital role to play alongside government and the tertiary sector in developing these skills.
An Enabling Regulatory Environment
The regulatory environment in part determines the incentives that support the early adoption of new technologies by business.
It is more than the legal framework. It embraces trade policy, tax policy, industry specific regulation, and consumer policy.
To date, our open trade and investment environment, quality urban telecommunications, and the banking sector have all been significant influences on the uptake of new technologies and e-commerce.
Businesses and consumers need to operate in an environment that is backed by adequate domestic and international legislation and self-regulation, to protect them from vandalism, fraud, theft, and misleading or deceptive trade practices.
Parliament is currently considering a raft of legislation to address issues in relation to:
·Electronic transactions
·Computer crime;
·And improving competition in telecommunications
Policy work is progressing on reform of our intellectual property laws and international coordination of law.
Partnership
As an open economy, a key concept underlying the government’s framework is that of partnership.
Our E-commerce Strategy emphasised the importance of partnership between government, business and the wider community. Leadership is identified as being the shared responsibility of government and business.
To advance this partnership the government set up the E-commerce Action Team (ECAT) and the ECAT Network. Members of ECAT are drawn from key sector organisations, such as accountants, bankers, lawyers, farmers, tourism operators as well as the IT industry. Their mandate collectively and individually is to promote and identify initiatives to advance the uptake of e-commerce in all sectors.
Conclusion
Today I have given you a glimpse of the government’s efforts to reduce compliance costs for business and the role that new information communication technologies will play in that.
I urge you to keep an eye out for next week’s announcement when we will give the full government response to the Business Compliance Cost Panel’s report, on that same day the Environment Minister Marian Hobbs will be delivering her report on the Resource Management Act and compliance cost issues there.
I encourage you to watch for both.
Thank you.