More Fundamental Attack On Business Costs Needed

More Fundamental Attack On Business Costs Needed

"It is pleasing that the government is making a further attempt to reduce business costs but its approach needs to be much wider", the executive director of the New Zealand Business Roundtable, Roger Kerr, said today.

Mr Kerr said that in its last term the government's compliance cost review produced meagre results while policy changes in areas such as taxation, employment law, utilities regulation, planning regulation and competition and securities law had greatly increased business costs. Planned changes to workplace health and safety and redundancy law would make the problems worse.

"It is not credible for one part of the government to talk about compliance cost reductions while other parts are heaping additional costs on business", Mr Kerr said.

"Moreover, compliance costs are only the tip of the iceberg.

"For example, the increase in the top tax rate added to compliance costs, by making the tax system, including fringe benefit tax, more complex. However, greater economic costs arise from the disincentives to work effort, investment and risk taking that it created. The overall problems can only be reduced by moves to a lower, flatter tax scale as recommended by the government's Tax Review.

"Similarly, tariff administration involves costs for both the private sector and the government, but the main economic costs of tariffs arise from the misallocation of economic resources. The solution is to end the tariff freeze and phase out tariffs, which would also facilitate the government's plans to negotiate free trade agreements with Hong Kong and other countries."

Mr Kerr said that a more fundamental approach to regulatory costs was needed, along the lines of the report Constraining Government Regulation (available at www.nzbr.org.nz) which the Business Roundtable in association with Federated Farmers and the Auckland and Wellington chambers of commerce had recently published.

"We look forward to taking up the ideas in this report, including the possibility of a Regulatory Responsibility Act, with the new minister of commerce", Mr Kerr concluded.

22 August 2002

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