I thank the Chairman for the invitation to address the joint committee and for the opportunity to inform it of the progress made by the high level group in identifying ways to reduce the administrative burden on business, arising from regulation.
I will outline some of the simplification initiatives the group has been driving over the past two years, as well as our main plans for the immediate future. While the work of the group is aimed at all business, it is of particular benefit to small and medium enterprises because, by their nature, they feel the burdens more and therefore benefit more from the simplifications we achieve.
The high level group was established in 2007 to act as a standing dialogue between Government, business and unions on administrative burden issues, arising from legislation. The group acts as a clearing house for specific red tape issues and concrete business suggestions for simplification.
The terms of reference of the group specifies that its remit is to identify the administrative burdens placed on businesses, in particular small and medium sized enterprises, arising from regulation or other administrative requirements, particularly in the areas of taxation; health and safety regulation; employment law; environmental regulations; company law and statistical returns; to determine ways to reduce and simplify administrative burdens and to eliminate them where they are unnecessary.
The group in its work is focused on identifying ways in which the paperwork associated with regulation can be simplified and the information flow between business and Government can be streamlined. In approaching its work the group is concerned to ensure that administrative savings to business are effected without undermining the policy objectives behind the regulation. This means that the protection afforded to workers or the environment, for example, will not be weakened as a result of reducing the cost to businesses of administering the regulation concerned. In fact, the group believes that enabling regulations to be dealt with more efficiently by businesses and the regulating authority would help to improve compliance and, therefore, make regulation even more effective.
We need to keep in mind, even as we focus on reducing regulatory burdens, that regulation has a positive purpose. Every society needs regulation to ensure its proper functioning. It provides a shared understanding between business, citizens and Government. It defines duties, rights and obligations. The challenge, therefore, is to balance competing interests, for example, businesses and consumers; employers and employees; growth and the environment. To remain competitive, we must have enough regulation to ensure a level playing-field for business, but not so much that we increase business costs unduly.
The primary source of our laws, regulations and rules is the Oireachtas, including the Government, the Dáil and the Seanad, the European Union, including the EU Commission, the Council of Ministers and the European Parliament. Essentially, our laws, regulations and rules originate in the democratic political processes and institutions.
According to the OECD and relative to other EU countries, Ireland is not heavily regulated. This is its view, notwithstanding the fact that the Oireachtas in the advancement of social and economic objectives and our membership of the European Union, has given rise to a big increase in the laws, regulations and rules which affect our daily lives.
The feedback from the business community to the high level group is clear. The community perceives itself to be heavily burdened with laws, regulations and rules and that the associated administrative burdens and costs are ever growing.
I will give some details of the work of the high level group in tackling specific burdens highlighted by the business community and the 25% administrative burden reduction programme being co-ordinated across Government by my Department using the standard cost model mechanism. Both of these processes are designed to reduce the administrative burdens caused by information obligations placed on business by legislation. Our ultimate aim is not deregulation, nor is it designed to undermine the socio-economic policy objectives of the law. Accordingly, in cutting red tape we have adopted a systematic, stepped approach. We are listing relevant legislation; prioritising the most burdensome, measuring the burdens using the standard cost model and planning the simplification measures to achieve the 25% reduction target.
We are in close contact with businesses and business representative groups, through seminars, workshops and meetings, in order to validate the identification and prioritisation of the most burdensome obligations; their measurement results; and the planned simplification measures.
This brings me to the last of my preliminary remarks and on to the subject of regulatory impact analysis of new legislation. The high level group welcomes the latest review by the Department of the Taoiseach of the regulatory impact analysis process. Eliminating red tape before it becomes enshrined in law is clearly the more commonsense approach. Implementation of the regulatory impact analysis process on new legislative proposals is a sound first step in achieving this goal.
The high level group's work programme is largely driven by business in consultation with other stakeholder interests, including the ICTU. The work programme originated in submissions made to the business regulation forum which preceded our group and suggestions from business made at workshops carried out on behalf of the high level group. We are open to new items being proposed by group members at any time.
Since its inception, the group has tackled almost 70 red tape issues. Thirty of these have already been processed to finality and a further 38 live items are currently at various stages of delivery. The processed items consist of those which have either been fully completed or have been found to be intractable but we have reached agreement in the group on those issues. To give the committee a sense of what we have achieved in the revenue area, the Revenue Commissioners have introduced less frequent VAT3 returns for small traders and in addition, approximately 65% of traders are currently accounting for VAT on the cash basis, rather than the invoice basis, thus improving their cash-flow position. Revenue is now offsetting redundancy rebates paid by the Department of Enterprise, Trade and Innovation, against a firm's tax liabilities. This improves the cash-flow position of firms at a time when they need it most. Revenue launched a new version of its website in December 2008, to make accessing information and services as easy and intuitive as possible, gathering them in logical clusters under primary headings. Revenue's on-line service, ROS, offers business and individuals a quick, secure and cost-effective method to manage their tax affairs online. Following a detailed and wide-ranging consultation process with tax practitioners, industry representative bodies, software providers and customers, Revenue introduced phase one of mandatory e-filing and e-paying for large companies and Departments with effect from 1 January 2009. Phase two of mandatory e-filing commenced in January 2010 and will apply to other large companies, other public bodies and local authorities.
We have been working closely with the Central Statistics Office. Following agreement on a common business identifier, the CSO and Revenue are collaborating to match their databases, allowing the CSO to receive relevant business registration data from Revenue. As a result of obtaining this data, the CSO has been able to discontinue its annual business register inquiry to businesses. The sample size for this survey was 51,400 businesses in 2007. From reference year 2010, the CSO also plans to incorporate corporation tax and income tax returns in the processing of surveys conducted under the structural business statistics regulation. It is envisaged that this will lead to a reduction of 80% to 90% in the number of businesses with fewer than ten persons employed which are sampled. The CSO has also reduced the sample size of its quarterly earnings survey, thereby reducing the overall burden on business. In 2009 the CSO published its second comprehensive response burden report. It found that 67% of enterprises in Ireland did not receive any CSO questionnaires in 2008. The CSO is continuing to make efforts to reduce burdens where possible.
In our Department, we are responding to a request from the group. A facility to allow the direct payment of redundancy rebates to Revenue, as I mentioned earlier, has been put in place to ease the burden on businesses with outstanding tax obligations. Substantial progress was also made during 2009 in streamlining the application process for employment permits, including the design of a new back office system which has been completed, and we are now working on the build phase. The Health and Safety Authority has produced a number of guides to help businesses, in particular small businesses, to comply with health and safety legislation.
In addition to these initiatives, it is often the case that simple guidance and straightforward information can help businesses to understand their legal responsibilities more readily and thus make it easier for them to comply with regulations. For example, the Companies Registration Office, CRO, recently produced an information note to guide companies wishing to change their annual return date in order that it will coincide with their Revenue filing date. This simple initiative will allow an increasing number of companies to reduce the duplicated effort that may previously have resulted from filing similar information on two different dates.
In the Department of the Environment, Heritage and Local Government a number of simplified procedures have been introduced in regard to waste collection permits. In addition, the Minister for the Environment, Heritage and Local Government, Deputy John Gormley, has recently announced the establishment of a local government efficiency review group to review the cost base, expenditure of and numbers employed in local authorities.
The Department of Transport has introduced new regulations during 2009 to streamline the permit system for wide and long vehicles on major interurban routes. Only a single permit is now required to transport such loads along designated national routes between major cities and ports. The Department, in conjunction with the Road Safety Authority, is expanding the number of designated routes, where feasible.
In order to understand and demonstrate the use of the standard cost model for measuring administrative burdens, the high level group measured eight different information obligations during 2007-08. Some five of these measurements were of simplifications that we had already completed and the group has reported on more than €20 million of cost savings for business in its 2008 reports. Those cost savings have arisen in redundancy payments totalling €1.2 million, audit exemptions thresholds totalling €3.735 million, tax clearance certificates totalling €0.3 million, CRO annual returns totalling €10 million and VAT registration totalling €5.4 million, a total of €20.635 million.
Further simplification processes are now proceeding. We are currently measuring the savings gained from initiatives we have taken. The administrative costs associated with the three areas concerned are €8 million for waste collection permits, €247,000 for road haulage permits and €650,000 for employment permits, a total burden of €8.8 million. It is intended that the benefits arising from simplification work being carried out on these three items will also be included in the cross-Government measurement process and will contribute to the 25% reduction target. Since we first met in July 2007, the members have been particularly interested in identifying and driving projects to reduce duplication of data requests falling on business. By their nature, many of these are co-operative projects between different Departments and agencies.
One of the key projects of the group is the facilitation of XBRL filing of company accounts. XBRL offers significant opportunities for businesses to automate and streamline their reporting to Government. The project is being worked on jointly by Revenue, CSO and CRO. Revenue, CRO and CSO have agreed that the three organisations could share financial data from the single filing of financial statements by a company and that this would reduce the filing burden on business. XBRL is seen as an ideal way of facilitating such a single filing because it provides for a uniform language for describing financial data elements and a platform for the easy communication and manipulation of financial data. Revenue decided recently that it would work towards the implementation of XBRL for receiving financial statements and computations. The roll-out date for XBRL implementation is likely to be towards the end of 2011.
The CRO and Revenue have worked closely in recent months to facilitate companies wishing to file electronically with the CRO and to offer the facility of using the Revenue e-signature. In addition, the CRO will shortly accept annual accounts in pdf format. It is envisaged that the facility to accept pdf accounts will be available in quarter 3 of 2010, allowing the companies annual return and its attachments to be filed completely electronically. We are also focusing on a number of issues under the responsibility of the Department of the Environment, Heritage and Local Government, including waste licenses.
The issue of risk-based enforcement has occupied quite a deal of attention and time in the group. We have been working on this in consultation with the group members and across business. To develop the potential of risk-based enforcement, the Department of Enterprise, Trade and Innovation has convened a small group of agencies to consider how best to develop the risk-based enforcement regime in Ireland. The current participants in this group are Revenue, the National Employment Rights Authority, the Health and Safety Authority, the Office of the Director of Corporate Enforcement, the Food Safety Authority of Ireland, the Environmental Protection Agency and the Private Security Authority.
The group is considering the range of issues and obstacles that must be tackled and solved in order to move this agenda forward. Its first objective is to develop processes for secure, accurate and controlled data sharing between the participating agencies in order that they can identify their potential clients more readily, calculate risk more precisely and reduce the burden of inspections on compliant businesses through more accurate identification of those who are likely to be non-compliant. The risk-based enforcement group will submit a report to the high level group before the end of the year on this issue.
In parallel with the current real time work of the high level group, it is also involved in the overall exercise of helping to guide and achieve the European Union target which has been adopted by the Government of reducing administrative burdens overall by 25% by 2012. In practice, we break this into two streams, namely, the measurement and reduction within our Department and the co-ordination of measurement and monitoring of reductions achieved by other Departments.
In 2009, we engaged EPS Consulting to measure administrative burdens in three key areas of regulation, that is, company law, employment law and health and safety law. We used the standard cost model as the basis for this measurement. We are now carrying out a series of simplification workshops with stakeholders to determine how best to reduce the measured burdens. I have asked the officials in these three areas to report to the high level group with their plans in the autumn.
Across wider Government agencies, the CSO also measured the burdens arising for business as a result of its surveys. All remaining Departments with regulations affecting business have been invited by the Department of Enterprise, Trade and Innovation to participate in a centralised measurement project. A prioritised list of information obligations covering all remaining areas is almost complete and will be circulated to the high level group for its inputs and validation shortly.
While responsibility for delivering on the 25% reduction in the administrative burdens on business lies with individual Departments, the members of the high level group are now assisting at every stage of the measurement process. We are helping Departments to prioritise the most important information obligations for measurement, working as part of stakeholder groups to validate the measurement process and validating the measurement results to ensure that they are realistic and representative.
We are giving effect to that for a series of workshops which are aimed at identifying the most practical ways that the measured burdens can be reduced. In our Department we have targeted three workshops. Two have already taken place, one on 11 May dealing with company law and the second on 1 June on employment law, and the third will be scheduled shortly to examine health and safety issues. Union officials are also invited to attend the workshops to ensure that workers' protections are not undermined by any of the emerging simplification plans.
It is intended that as administrative burden measurement is completed in other areas, similar simplification workshops will be organised to brainstorm fresh ideas for red tape reduction. The high level group will continue to play a key role in this process. Neither the work of the high level group itself nor the 25% cross-measurement and reduction project could proceed successfully without the continuing input from our key stakeholders. It is business costs that we are aiming to reduce, therefore it is a business understanding of these costs and business-friendly solutions that we must find.
We have taken a lot of care, from the Government and administration sides, not to try to decide ourselves what is most pressing or relevant to business. We have gone out and asked businesses to tell us where it is hurting most and the areas in which they are most interested in having work focused. We look forward to continuing the work with the high level group and to the engagement this afternoon.