Red tape howls ring hollow - survey

Complaints by small businesses that they are being held back or even strangled by red tape may actually be a red herring, a recent study shows.

A University of Otago survey of 25 small Dunedin companies with annual turnovers ranging from $50,000 to $1.5 million has shown that perceptions of the time spent on compliance issues are often exaggerated.

The research, carried out by Robert Alexander and Stephen Knowles, of the economics department, and John Bell, of the marketing department, casts doubts on Business New Zealand's claims that firms with one to five employees spend more than five hours every week complying with Government regulations.

Instead, the Otago University researchers found its sample spent only a little more than an hour a week dealing with such matters.

Treasury has asked the Otago team to replicate its study on a larger scale in Auckland and Wellington.

Dunedin cafes, motels, garages, hairdressers and engineering firms were asked to keep a diary for three months recording the actual amount of time they dealt with red tape.

Alexander said they had taken a different tack to Business New Zealand, which, in its survey last year, based its more than five-hour-a-week figure on employers' estimates of time spent on compliance.

The Otago investigation also found that firms spent an average $100 a week paying others to do their compliance work and that some companies were more concerned about the number of tasks they had to complete rather than the time they took.

Some also confirmed compliance costs had put them off expanding their businesses.

"There are still issues out there that they would like to see addressed, Alexander said.

- NZPA