Vol. 438 No. 4
17 Mrs. Doyle asked the Minister for Enterprise and Employment whether he has carried out an audit of the cost to small business of complying with regulations governing the various aspects of employing and doing business in Ireland and tax administration; the size of the costs involved; and the areas in which deregulation is planned.
My Department has not carried out an audit of the cost to small business of compliance with tax and other regulations. A study of the compliance costs of PAYE was undertaken on behalf of the then Department of the Public Service in 1984. One of the key findings of the study was that these were regressive with smaller firms incurring proportionately higher costs.
On the basis of a survey of 119 enterprises, the study estimated that the gross compliance cost was approximately 4 per cent of the total PAYE liability for firms with fewer than 25 employees but just under 1 per cent for firms with over 400 employees.
The administrative burden on small business under the tax code and other regulations is one of the main issues being considered by the Task Force on Small Businesses. The task force is due to report later this month and it would be premature to comment on the areas in which deregulation might take place in advance of the receipt and evaluation of its proposals.
In his budget speech, the Minister for Finance announced a number of measures designed to reduce the administrative burden on small businesses under the tax code. These include the introduction of a single tax registration form, a single tax clearance certificate and the revising of VAT thresholds. As the Minister for Finance acknowledged, these measures broadly follow recommendations made in the task force's budget submission.
In 1989 the University of Bath conducted a study which arrived at the conclusion that compliance costs on traders were just under £8 per £1,000 of goods sold. In companies with a turnover in excess of £10 million it estimated that the compliance costs were about 3p per £1,000 of goods sold. These are tentative figures and I am not sure whether they are useful statistics.
Will the Minister agree that in dealing with the problem of compliance for small business, which has become a major issue, and on which he has taken a very high profile position, it is essential to have some idea of the extent to which burdensome obligations are placed on companies? Otherwise we could well embark on substantial changes and, at the end of the day, have no firm grounds for believing we were improving the position. Will he also agree that, prima facie, if the PAYE wage bill is costing 4 per cent more for smaller employers, VAT and withholding tax burdens and other regulations related to business must be adding substantially more than 4 per cent? Finally, will he agree that it would be worthwhile to carry out such an audit on a small sample basis?
The issues have moved on from an audit. Having discussed this matter with the task force on small business, who have been working for some months, the case is proven that small business disproportionately bears the cost of regulations and compliance. It is clear that the percentage for smaller firms is considerably higher than for larger firms. Without wishing to demean the Deputy's suggestion, an academic assessment at this stage might be comforting but I am virtually certain it would merely support what the task force on small business said, that they bear an undue proportion in regard to compliance and regulation.
I am more interested in getting some practical results. The task force made a pre-budget submission to the Minister for Finance. As the Deputy will be aware the Minister announced seven measures, arising directly from the task force, specifically to assist smaller firms. He increased the VAT threshold, reduced capital gains tax from 40 per cent to 27 per cent; incorporated roll-over relief; changed the cash receipt basis for VAT on turnover up to £250,000; amended the BES scheme to take account of smaller firms; allowed a PAYE allowance of £800 for the children of proprietary directors; amended the PRSI percentages and announced a small business expansion loan of £100 million which is proving useful to small industry. Those seven items are now in place. When the task force reports I expect to have a similar number of measures put in place because small business wants action, not further academic studies.
