Our next item is a discussion with Ms Patricia Callan, director of the Small Firms Association. On behalf of the joint committee, I welcome Ms Callan, Ms Avine McNally, assistant director, and Ms Carol Ann Casey, CA Consulting. I draw attention to the fact that while members of the committee have absolute privilege this privilege does not apply to witnesses appearing before the committee. Members are also reminded of longstanding parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official, by name or in such a way as to make him or her identifiable. I propose that we hear a short presentation by Ms Callan which will be followed by a question and answer session.
Business Regulation: Discussion with Small Firms Association.
Ms Patricia Callan
I thank the Chairman and the committee for inviting us to discuss one of our favourite topics, namely, the regulatory burden on small companies. In my presentation I will differentiate clearly between regulatory and administrative burdens, in respect of which there is much confusion. They are separate and need separate mechanisms to address their effects. I will now consider regulatory burden and regulatory impact assessments.
All legislation introduced in Ireland must be complied with. Most of the time, it falls on small businesses to make themselves aware of new legislation which is signed into law by the President, as no basic information is issued to companies to tell them what it is they are required to do. Therefore, it is difficult for companies to be compliant because they are not told with what they should be compliant.
Papers and research reports state a regulatory impact analysis should be conducted of all proposed legislation to establish whether the costs associated with its introduction outweigh the perceived benefits which legislators believe it will have. We were assured by the Government that this would be the case and that it would happen automatically. To date, as far as I can see, it has not happened to any great extent. We have been told a regulatory impact assessment cannot be published because of Cabinet confidentiality as it would be part of Cabinet papers.
My colleague on the national executive, Ms Carol Ann Casey, will discuss the Employment Law Compliance Bill, about which we have major concerns. It has the potential to imprison owner-managers of small companies for 17 ridiculous breaches such as not having a photocopy of a passport on file for every employee, which is national identification by the back door but that is another issue.
We believe all proposed legislation, including EU proposals, should be subject to a regulatory impact assessment. Much of our legislation comes through EU directives and we are concerned that in Ireland we have an element of gold-plating in that these directives are not merely transposed but added to, the consequences of which with regard to burdens are not apparent.
I am sure committee members are aware that according to all the reports compiled, the estimated cost of administrative burdens is €500 million. I would like to see the total estimated cost of complying with legislation because it is much more that this. In an era when we have regulators for everything and agents enforcing legislation on owner-managers who are concerned with keeping people in jobs, selling, marketing and trying to run businesses, if we heighten the compliance regime, we should also heighten the education regime and our sensibilities with regard to how we introduce legislation.
With regard to the legislative process, every year we would like to see a schedule of legislation which must be reviewed. Law has been introduced for a century. Is it ever reviewed or removed from the Statute Book? It should happen far more often. Automatically, a company operating an ISO system must review all of its procedures and controls every six to 12 months. Does this happen in respect of laws passed? The answer is no.
Certainly, good work is ongoing with regard to the Companies Acts and the company law (consolidation and reform) Bill. However, our experience of consolidation has been mixed. At EU level, legislation dealing with chemicals was amalgamated in the REACH directive. However, with 3,000 pages it is not much of a consolidation. It is in one Act rather than many but the impact is the same. We must be practical and pragmatic about real cuts.
I accept that changing legislation is much more complex than reducing the administrative burden. That is why the focus of the high level group — of which I am a member — on business regulation is on the administrative burden element. It is seen as a quick or easy win which will solve the problem. However, I am anxious to flag the much bigger issue of genuine regulatory impact analysis which needs some thought and consideration.
Administrative burdens arising from legislation can come in many shapes and guises. The most common problematic areas for companies are dealings with the Revenue Commissioners, the Office of the Director of Corporate Enforcement, the National Employment Rights Authority as well as the regulators concerned with health and safety, data protection and so forth. Added to that, are the administrative burdens which may arise from legislation specific to companies operating in particular sectors. In terms of compliance, the biggest burden on companies is form-filling. I could give the committee a long list of what companies are required to do but as a general illustration, in a company employing eight people, half of one person's job will solely be filling out forms.
Three of our member companies engaged in a useful exercise with the Revenue Commissioners last year, whereby Revenue tracked what a company had to do to comply with legislation. This was a very clever exercise which enabled the Revenue Commissioners to glean from the coalface what individuals filling out forms must deal with. That type of learning could be used productively elsewhere.
In the context of the new focus on employment rights and the National Employment Rights Authority, we have very serious concerns about the bureaucracy associated with employment law. As an example, under the Organisation of Working Time Act, every single employee here is obliged to fill out an OWT1 form. I wonder if employees of the Houses of the Oireachtas have even filled out such forms. When we engaged in discussions with the National Employment Rights Authority on enforcing this element of the legislation, we discovered that even if companies are keeping such records but are doing so electronically, in spreadsheet format, the records are not valid because there is no electronic signature in this country that is legally liable, except for that used by the Revenue Commissioners. The Revenue Commissioners designed its own electronic signature and spent millions getting it right. However, that is not transferable to any other arm of the State. Therefore, companies must keep for three years paper copies of weekly time sheets for every single employee. The warehousing costs, the fire hazards and the practical inconvenience associated with that are significant.
These are the types of issues that our members raise constantly. Many companies do not even know they are meant to be engaged in such record keeping. We must start thinking about such issues. Our members are not trying to undermine the law. The law exists and can be dealt with under proper regulatory impact assessment but we must examine the overall aim in terms of getting people to comply with the law and making it as easy as possible for them to do so.
Similarly, companies must make annual returns to the Companies Registration Office. That office has an on-line system but the form must be printed out, signed and submitted. In the context of e-Government, of which we have heard much in recent years, that is nonsense. In terms of the broader remit, the issue is about how those in Departments think and about getting them to recognise the implications of introducing various compliance requirements. With all due respect, the letter inviting me to attend today's meeting requested 20 copies of any written submission I might make. The problem is that some people do not think such things are a big issue. Likewise, if we attend the Labour Court, we must bring six copies of our submissions. We operate in an e-mail and internet-based society. That has been embraced by the private sector and is where we are driving innovation and productivity. These are simple things that can be addressed by a change in the way of thinking and by educating those in the public sector.
Regarding the high level group on business regulation, the report to the Tánaiste was very useful. We have found the process far more useful than any of its predecessors. We are identifying issues for businesses, bringing them to Mr. Seán Gorman at the Department and explaining to him that these are the most important areas for change, costing them using the standard costs model, identifying what savings can be made and when they are changed, we can say we have won. So far, we estimate a saving of €20 million out of a total of €500 million, which is a step in the right direction but nowhere near where we need to be. My only concern is that while the Department of Enterprise, Trade and Employment is embracing the process, it is not clear that any other Department is doing so. We have not seen much evidence to date of that. For example, the packaging regulations were changed recently by the Department of the Environment, Heritage and Local Government, whereby the limit was reduced from 25 tonnes to 10 tonnes, which means many more people are caught.
Does the Department have any idea how much additional revenue it will gain, relative to the administrative cost involved? The answer is no because it has not conducted a regulatory impact analysis, even though every local authority is demanding proof from our members that they do not need to comply. Our members thus have to spend €5,000 to have a consultant conduct a packaging audit. Simple steps can and should be taken to address this issue.
There is a real sense of frustration among business owners because they feel they are unpaid employees of the Government. Coming on top of everything else they are trying to do, this is nonsense. I have asked the CSO, if it is to ask people to fill in questionnaires every other month or quarter, that it at least have the courtesy to inform the businesses concerned when it publishes the results in order that they know the uses to which the data they provide are being put. People are not stupid; if they feel filling in forms benefits them or is in the national interest, they feel much happier about doing so. However, they are constantly being asked to contribute but given nothing in return.
This is one example of several that we could discuss further in a broader discussion but it is an amazingly important issue for small businesses. We have discussed it intensively in the past decade and it is the No. 1 priority in the European Union for small businesses. While it also appears to be a priority for the joint committee, our members want to know how we can make serious progress.
I thank Ms Callan for her presentation. We have dealt with many of the issues she raised on previous occasions but, as she noted, we have gone around in circles in recent years without making much progress.
Does the SFA have a list of unnecessary legislation from which we could proceed?
Ms Patricia Callan
We do.
We have been promised by the Department that there will be a 25% reduction but that merely represents the adoption of European policy. If this and other committees had a list from which to work, we could begin to apply pressure in specific areas.
Small businesses appear to have significant issues with local government regulations and charges, particularly start-up costs and the contribution levies imposed on local businesses. Does Ms Callan have any comments to make in that regard? Is it a major deterrent or are businesses taking the costs on the chin? I assume it is a deterrent to creating jobs and expanding businesses.
In regard to form filling, I would go further than Ms Callan's suggestion on publishing results. If people fill in forms, they should be told what will happen as a result. It has been the case under every Government that we have had terrible planning decisions, despite having these forms. Even though we fill in census forms, our schools do not match our population distribution. Similar issues arise in respect of businesses, for which no real results ensue from the provision of information. We need to explain the reasons we collect information and show whether it will change the way we do business or make legislation.
In regard to the EU gold plated standards, we undoubtedly get excited when we receive directives from the European Union. We jump up and down and ask how we can make them even more challenging. Almost 500 directives are received each year, a considerable number. I am a member of the Joint Committee on European Scrutiny which deals with many of these directives, a number of which have an impact on business, yet they are thrown about willy-nilly and without much thought. As far as I can tell, the legislation passed in recent months has not been subject to regulatory assessments, despite guarantees to the contrary. It is happening elsewhere in the European Union but not in this Parliament. We must put pressure on the Government to change this. Am I correct in believing the European Union is beginning to change its laws in order to cater for small businesses? Is Ms Callan satisfied with the way that this is taking place? It does not suit every business but it certainly will suit small companies.
I am at a loss to understand where the obstacle is to electronic signatures we agreed to 12 or 13 years ago. Another committee is compiling a report on the matter. We should be much further along the line on e-payments, e-Government and electronic signatures. Compared with our Scandinavian competitors such as Finland, we are not at the races. The movement of cash gives rise to further costs for businesses. I share the SFA's frustration and hope we can bring about change. As that is the purpose of the committee, I hope we will make some progress on the matter. As we are in total agreement on many of the issues raised by Ms Callan, it is a question of how we address them.
Like Deputy English, I agree with what Ms Callan said. I welcome the delegation and their words. Ms Callan talked about the perceived benefits of regulation, but there must be a proper assessment before anything is done. Ms Callan has given us instances of how regulation interferes with competitiveness. Ministers like to regulate, or civil servants prompt them to do so, perhaps to keep them busy, but the impact is not properly assessed. Here we hear what it costs businesses at the front line. Does Ms Callan have any figure on the average cost per annum to businesses? During our last visit to Britain we were given an estimate of €4,000. They aim for a reduction of 25% across all Departments and I want self-policing to be established in each Department. We must be mindful of the costs and red tape needlessly imposed in some instances. Reducing the impact of regulation is vital to the country, especially in these straitened times. I would be interested to hear if the small business sector has any figure for what it costs businesses per annum.
I join the Chairman and other members in welcoming the SFA. As an advocacy organisation on behalf of the small firms sector, the SFA engages with various Departments. We all accept that in any segment of life where there is governance and regulation there will always be the argument that it is unnecessary. The counter argument is that it is necessary for record keeping and proper monitoring and so on. There is always an argument. I accept the SFA's point that there can be overbearing and, perhaps, unnecessary regulation in many areas. What is the SFA's modus operandi for engaging with Departments if it feels legislation impacts unduly heavily on some or all of its members? Does it write to Departments, seek meetings with their representatives, engage with one-to-one discussions with them on specific points or simply issue a press release on the issue and let it rest there?
There are clear and tangible benefits to coming in to engage with a committee such as this. Could the SFA get down to the specific areas it feels should be changed, even in summary form? I do not accept the point that a written submission to the committee should not be necessary. Its members are under time constraints. Ms Callan represents the interests of the SFA members. She should point out to the committee the specific areas its members need to examine and that it needs to advocate on the SFA's behalf to the Minister or Department responsible or wherever it might be. The modus operandi for engagement with officials, Ministers and public representatives such as are on this committee is important.
I very much appreciate Ms Callan's contribution. Ms Callan raised the question of the computer, broadband and access to the speed with which all the inputs can be electronically analysed and adjusted.
The interaction with Revenue was referred to. Has there been an improvement in this interaction over recent years, particularly with the introduction of the Revenue on-line service? I remember that in budget after recent budget, improvements have gone through relating to the VAT regime in particular. It seems Revenue is very much working to reduce the amount of time and effort needed. That is a major amount of work with regard to the regulatory framework.
I take on board the question of the electronic signature. I had not really thought about it that much but the comments of the witness have got the bells ringing in my head. How many different bodies would be helped if the electronic signature system was developed, which would allow forms to be sent electronically, as with the Office of the Director of Corporate Enforcement, ODCE, and the CSO?
Relative to the amount of work and effort put in by small businesses to Revenue documents, how much work must be done on CSO and ODCE forms, as well as other forms? By how much would this be reduced if this old-fashioned paper was taken out of the system?
I wish to ask about another item relating to regulation, namely, whether it has improved competitiveness and helped level the playing field of doing business. Has it taken away the cowboys and gangsters in business? In the past few days we have seen investment banks in America getting totally out of hand because they were not regulated. I do not know if they have sought regulation or if they have been told they are coming in as holding banks and will be regulated. Has regulation helped the more than 90% of business people who want to operate in a fair, equitable, honest and just manner? What are the positives from regulation?
I welcome Ms Patricia Callan and her team. As an independent retailer, much of what she has to say resonates with me. I am aware that most people in the retail sector, such as shopkeepers, publicans and self-employed people in the services area, would be particularly frustrated at the amount of unpaid Civil Service-type work they must do. I employ a very small number of staff and at least one is tied up for at least one day a week with paperwork. That does not include invoices and statements, which form part of my business, but relates to paperwork for somebody other than myself.
Deputy Kirk mentioned some of my points as regards how the Small Firms Association has been addressing the issue as an organisation and if it has been dealing on a one-to-one basis either with Revenue or other Departments. What kind of satisfaction levels is being achieved? I will not dwell on that.
Another valid point being made is how regulation is disseminated, promulgated and passed down the line to the eventual end user — if that is the term — or the fellow who is responsible at the end of the day for complying with regulation. As a committee, we might look at the information flow from the time a regulation is decided upon in Brussels to when an individual small business must deal with it. I would like to see what the flow is like.
Like other speakers, I welcome Ms Callan and her team. I am trying to think of the ideal system. Has the Small Firms Association identified an administration or government of a country which on the issues she raises is the most accountable and yet at the same time the least time wasting?
Sometimes people argue against regulation for political reasons and in countries such as America they would generally be seen to be on a side of the political spectrum on which I would not be positioned. We need regulation, accountability and transparency. However, at the same time we must free businesses to work accountably but as free from bureaucracy as possible.
The problem is that there are so many different Departments, the European Commission and other bodies. Is there a gateway through which all of these matters should go? Would that make sense? It may not, because each Department would have its own view of what might or might be involved. For example, is there a case for the chambers of commerce, which are active nationally, and all of the business organisations including the Small Firms Association meeting with all of these bureaucrats and Revenue officials to come up with a solution? What is the solution?
I fully accept the thrust of what Ms Callan has said, that it is expensive, it wastes time and one cannot use the computer and do modern tasks in a modern way. What is the kernel of what needs to be done? What is the end point to which we should move and still have the accountability, of which Ms Callan and the committee are in favour, but without the bureaucracy?
The committee has decided on a work programme to look at the effect of regulation on the business community in particular. I suppose any group which will appear before the committee will state that its sector is over regulated and that it would much prefer to be free of the chains of regulation in one form or another.
There are two questions which I would ask. In dealing with Departments or State agencies, is there one particular State agency which is efficient or effective in dealing directly with the Small Firms Association or its members on enforcing its regulation and are there other Departments which are completely at odds with what the Small Firms Association is doing? I will leave it at that and perhaps come back to the group when it has responded to the questions raised by members.
Ms Patricia Callan
I will answer the questions in reverse order. My earlier comments about Revenue were positive. Revenue has been the leading light in this regard for many years. It is well over a decade since we had our first business customer focus group with Revenue and we have been working with it in that way ever since. For example, it will have members in to review forms and to test out systems in advance. With the on-line service and the electronic signature, Revenue has all such matters sorted. In terms of the compliance aspects of Revenue, it is proactive in running all of these matters by us. It is continually engaged in administrative burden reduction projects for us. Revenue has a correct sense of customer in terms of the business community generally and if one were to look for one agency that is particularly good, I would say it is Revenue.
Notwithstanding that, people have issues with Revenue, perhaps not in terms of administrative burdens but in its behaviour. For example, people would take issue with the fact that if they even slip up at all administratively, they get threatening letters and the sheriff is called in very early — much faster than used be the case. Similarly, they would take issue with Revenue over allowing shopping tourists return at Christmas without enforcing the customs regulations involving a loss, not only to the retailers but also of VAT and import duties to Ireland. The enforcement of the law would be more of an issue there.
The question of an ideal system is among the issues being looked at by the high level group on business regulation. Holland would be viewed as the role model. It developed the standard cost model. The interesting aspect of both regulatory impact assessment and the standard cost model is that everyone everywhere agrees with it. I have not heard of anyone who disagrees with it. The Departments agree with it. It is merely a matter of implementing it.
That brings me back to a resourcing issue, to be fair to the Departments. This is a big issue. It will involve people doing the work, which means it must be resourced accordingly. A central unit at the Department of the Taoiseach issues instructions to other Departments. The staff of the high level group who are supporting that work contact the officials of these Departments when we are dealing with different aspects. This represents an additional burden for the staff in question. If we are serious about dealing with this matter, resources must be provided. In the current climate we favour a reduction in public sector spending. However, if this is a priority area, resources must be provided.
On how we engage with this matter, we are here at the request of the committee because members consider this an important issue. We are happy to be here. Ms Carol Ann Casey, one of our members, has given of her time in order to come here to discuss the matter with the committee. The Small Firms Association is a full partner under the social partnership agreement. If we have particular issues, we either work through the social partnership process or directly with Departments. We start tracking legislation in the European Union through our membership of two organisations — BUSINESSEUROPE and UEAPME. We make an input at that stage in terms of directives. We also input directly through Departments, the representatives of which lobby in Brussels in respect of such legislation. Trying to influence matters as early as possible is how the process tends to work. In the context of implementation in Ireland, we track what is happening and try to work with the various Departments throughout.
This is meant to be an automatic process. Ours is a membership-funded organisation. However, we should not be obliged to do this. It should be an automatic part of how Government does its business. While we are happy to continue to do so on behalf of our members, there are 250,000 businesses in Ireland, all of which are suffering as a result of this. If it is good for the country and the economy and if it can save 2% to 3% of GDP, it should be prioritised.
To return to the issues of competitiveness, a level playing field and gangsters, I attended a meeting of the Joint Committee on European Scrutiny in respect of the operation of intra-Community transactions, the VAT regime and regulations. Again, this was notionally something being introduced in the guise of administrative simplification. However, Revenue, the Department of Finance and our organisation all considered it would be a bad idea because it would impose many more burdens on legitimate businesses. The sharp-shooters, gangsters and people trying to cheat the system are so professional that they will continue to get away with what they are doing. It is a question of whether people within the spectrum who are compliant and complete the relevant form are continually being regulated, while those outside the system are either completely outside it and operating in the hidden economy or are so high end that they have fancy lawyers to deal with matters of this nature for them. In essence, there are two extremes. I do not believe the problem will necessarily be solved by continually legislating in respect of legitimate businesses.
I understand anyone who needs to be able to bring a company to court must have a proper electronic signature. The Office of the Director of Corporate Enforcement, ODCE, the CRO and NERA are the relevant agencies involved in this area. Anyone who wishes to prosecute a company needs to have this in place. It makes tremendous sense to invest in doing this and there might be a way to use what Revenue has done and implement it. I initially thought that it involved a pdf of a signature but it is not; it is very complicated and extremely expensive. However, it is certainly a priority.
On businesses engagement with the CSO, this is the area they find most irritating because they do not see the value of it. When they deal with Revenue, the ODCE or employment bodies, they recognise that they are obliged to comply with the law. However, they are of the view that engaging with the CSO is just one more thing do. One of our members who is due to address an EU conference being held in Athlone next week at which this matter will be discussed presented me with a list of things — which I can circulate to members — he is obliged to do in the context of his business. He must complete VIES quarterly submissions, provide INTRASTAT information, complete VAT 3 returns and P30s, provide annual service inquiries for the CSO, a quarterly inquiry to retailers and wholesalers, etc. He has calculated the amount of time it takes to complete this work and is going to raise the matter at the conference to which I refer because those present will want to hear about it. Those who have given thought to this matter realise that the process is simply burdensome. The issue is what we are getting for it versus without it.
Deputy Kirk referred to my comment on the submissions. All my members are busy people and they can comment in their own words before Oireachtas joint committees but they must comply. Being busy is not an issue; it is simply a question of what is easy and what is necessary. All our members feel their No. 1 aim is to stay in business, which is not that easy currently, and this regulation is on top of that. This is a small part of what owner-managers have to do every day.
The average cost per annum for an individual business should be examined. It does not exist but my members could conduct an assessment, as we did with Revenue on the time it takes to fill in the bits and pieces associated with that body. We could conduct a smaller study, like we did with Revenue, in other areas if people felt that would be good. I am sure we could find volunteers to do that. The cost has been measured at €500 million but even that is an underestimate. We have sufficient evidential support to do something in the area and we are open to doing that if people want to.
The list of unnecessary legislation and administrative burdens is being fed into the high level group on business regulation. That functioning forum is doing good work but the difficult next area to be examined is employment law, which will be massively contentious with the trade union movement, and the second issue is to get into other Departments other than the Department of Enterprise, Trade and Employment. Any body or agency within the enterprise family tends to be more business minded and deals more with business owners but the problem arises when one deals with other Departments that have not met a business person. For example, local authorities and the Departments of the Environment, Heritage and Local Government and Transport do not get it at all.
The regulatory impact assessments are not happening. Under the EU small business act, a strong commitment is made to regulatory burden reduction and a simple phrase has been coined: "Think Small First." Anyone implementing legislation must begin from the premise of thinking about the impact on small business and working back from that. The logic is that larger companies have fleets of compliance people who are responsible for ensuring everything they do is above board and their reputations are staked on it. However, in smaller companies, the owner-manager generally does all of this as well as running the business. It may not be deliberate gangster-type behaviour but they may let the paperwork slip. Our enforcers and regulators need to hear that message clearly.
Ms Carol Ann Casey
I support everything Ms Callan said. I am a small business and I must go through all that has been addressed. As Senator O'Sullivan said, this creates a significant burden on a small business. My business is HR compliance. For example, when I visit a company to conduct a HR audit and I mention what is coming down the tracks in legislation, employers are fearful and they say they do not have time for that or they find it burdensome. It is disproportionate for small businesses, with which I do most of my work. Many small businesses say they will not implement the working time directive because it is not feasible physically to sign off the records for every employee and retain them for three years. They will not do it. Compliance is the issue. I can only give advice, but the small business must be compliant. This is a burden and takes time.
With regard to the proposed Bill, there is a disproportionality with regard to criminalisation of employers for minor compliance offences in comparison with other offences. Is it realistic, therefore, to expect a small business to take this into consideration? Some 23 new criminal offences are introduced with the new legislation. It will, therefore, be time consuming for businesses trying to ensure compliance to understand these issues and ensure they do not affect their businesses. Will this stifle job creation in the Irish market? We must aim to be competitive, both in Ireland and at the European level, and therefore must look carefully at this part of the regulation.
I support Ms Callan's view that we must look at the practical issues. I also support her in saying that every small business must go through all the issues discussed here. A national council member has produced a list of the changes that must be made and the costs related to these. We discussed this issue at council level last week and found it will be a significant burden.
I thank Ms Casey and the other delegates who attended this committee. We will reflect on what has been said and possibly will have further discussions with the delegates as we try to tidy up the issues and bring better focus to the regulation for small businesses and the community.