Sizing up red tape

OECD Observer
Page 64 

Businesses’ Views on Red Tape: Administrative and Regulatory Burdens on Small and Medium-sized Enterprises 

Filling in government forms, filing official documents and sorting out red tape can be confusing, tedious and time-consuming. But imagine being asked to fill in a form about the administrators, rule-enforcers and bureaucrats themselves. This was the task set to the managers of 8 000 small and medium-sized businesses (SMEs) in 11 OECD countries, and their feedback is not merely paperwork.

The survey asked businesses how easy or difficult it was to comply with employment, tax and environmental regulations and how much it cost them. It also questioned the efficiency of administrative decision-making, right down to personal contact, with true/false responses to statements such as: “Officials do not give definite answers”; “It is not clear who is responsible for decisions”; “One does not get the same view no matter who one contacts”.

The findings confirm that government regulations and bureaucratic formalities have a significant impact on small and medium-sized businesses. SMES surveyed spend on average US$27500 per year complying with administrative requirements. This equates to an average cost of US$4100 per employee, or around 4% of the annual turnover of companies. And the smaller the firm is, the greater the hassle. The smallest companies – those with less than 20 employees – endured more than five times the administrative burden per employee than larger firms did. Small SMEs spend an average of US$4600 per employee on paperwork, whereas SMEs with over 50 employees spend around US$900. Furthermore, small SMEs made eight times more requests for authorisations or decisions each year than larger SMEs.

Not surprisingly, around 80% of SMEs believed that compliance with employment regulations was bad for business. Many felt that employment regulations increased non-wage labour costs, and increased the difficulty of hiring and firing staff.

The point of the survey was to clarify for governments where its red tape was poorly designed or applied, whether it was inefficient or outdated, and whether it impeded innovation, trade and investment. Clearly, regulations are needed, not just to protect public interests but to allow markets to work properly too. But, as this reports shows, red tape may need to be less costly, streamlined and more transparent.

©OECD Observer No 229, November 2001 




Economic data

E-Newsletter

Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly


Online edition
Previous editions

Don't miss

  • When someone asks me to describe an ideal girl, in my head, she is a person who is physically and mentally independent, brave to speak her mind, treated with respect just like she treats others, and inspiring to herself and others. But I know that the reality is still so much different. By Alda, 18, on International Day of the Girl. Read more.
  • Globalisation’s many benefits have been unequally shared, and public policy has struggled to keep up with a rapidly-shifting world. The OECD is working alongside governments and international organisations to help improve and harness the gains while tackling the root causes of inequality, and ensuring a level playing field globally. Please watch.
  • Read some of the insightful remarks made at OECD Forum 2017, held on 6-7 June. OECD Forum kick-started events with a focus on inclusive growth, digitalisation, and trust, under the overall theme of Bridging Divides.
  • Checking out the job situation with the OECD scoreboard of labour market performances: do you want to know how your country compares with neighbours and competitors on income levels or employment?
  • Trade is an important point of focus in today’s international economy. This video presents facts and statistics from OECD’s most recent publications on this topic.
  • How do the largest community of British expats living in Spain feel about Brexit? Britons living in Orihuela Costa, Alicante give their views.
  • Brexit is taking up Europe's energy and focus, according to OECD Secretary-General Angel Gurría. Watch video.
  • OECD Chief Economist Catherine Mann and former Bank of England Governor Mervyn King discuss the economic merits of a US border adjustment tax and the outlook for US economic growth.
  • Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.
  • OECD Observer i-Sheet Series: OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.
  • How sustainable is the ocean as a source of economic development? The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa. blogs.worldbank.org
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at www.oecd.org/careers .

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2017