Red tape still irks SMEs – survey

SMALL to medium sized enterprises (SMEs) are increasingly optimistic about their economic outlook, despite being strangled by taxation red tape, an Institute of Chartered Accountants survey has revealed. The institute’s 2006 national SME survey of 802 small to medium sized businesses revealed that 67 per cent of respondents expected sustained or improved economic conditions for the next 12 months, compared with just 46 per cent in the 2005 survey. Conversely, 32 per cent expected weaker economic conditions, down from 52 per cent in 2005. Practitioners in Western Australia were the most optimistic, with 44 per cent predicting stronger conditions ahead. Despite the smiles, 95 per cent of all respondents called for action against the level of legislative red tape incurred by SMEs. More than 750 respondents cited the number one issue being the need to reform the complexity of current taxation legislation faced by small businesses. Similarly, 91 per cent of practitioners questioned nominated the volume and frequency of change in the federal taxation system as an area requiring reform; and 87 per cent expressed a level of concern for the overall federal tax compliance costs, up on 81 per cent in 2005. “These repeated frustrations expressed by small businesses, year after year, over federal tax legislation sends a clear message to the government to reduce red tape,” Institute of Chartered Accountants SME chairwoman Sue Prestney said. “Our current tax legislation is not written for the 96 per cent of Australian business that are SMEs. It is designed for the big end of town and until this changes, tax legislation will continue to impose onerous compliance costs for small businesses.” The biggest threat to the economy was identified as wage increases, for the second year running, with 74 per cent of respondents expressing concern. A number of employment issues rated highly in the 2006 survey, with 77 per cent of those surveyed citing concern over occupational health and safety issues and 65 per cent SMEs’ inability to attract staff, as well as over unfair dismissal laws. However, it was the 91 per cent of respondents that nominated an inability to retain staff, with more than half rating this as a major concern, which proved the most significant employment issue and demonstrated that the skills shortage continued to bite. “The institute’s survey highlights the impact that macro issues are having on small businesses. Practitioners report SME owners are worried about not being able to attract and keep staff,” Ms Prestney said. “They are worried about a lack of successors and only 11 per cent of those surveyed believe that the government’s Work Choice changes will have a positive impact on the employment growth of small businesses.” The 2006 survey also revealed that the state taxes of most concern were land tax (75 per cent) and payroll tax (75 per cent, closely followed by stamp duty (72 per cent). In response to the obvious concerns shown by SMEs over the complexity of the tax system and associated compliance costs, the institute has commissioned a report from Atax, which will focus on improving access to various tax concessions currently available to small businesses. This report will be submitted to government with a view to providing further support for the consideration of the Taskforce on Reducing the Regulatory Burden on Business. The Institute of Chartered Accountants in Australia is focused on leadership, protecting the standards and reputation of the accounting profession and influencing the policies and regulations that affect the industry. It represents 700,000 members worldwide, who are fully qualified chartered accountants.