Red tape is costing firms €116 million

The private sector incurs €116 million a year in administrative costs arising from laws and procedures, according to a study conducted by the Management Efficiency Unit.

In a presentation to the Malta-EU Steering Action Committee last week, the MEU said 30 per cent of this administrative burden was primarily related to Value Added Tax legislation.

This was closely followed by the cost of following procedures laid down in company laws: €30 million.

The figures were released by the Chamber for Small and Medium Enterprises – GRTU which, in its weekly newsletter, called for the setting up of a bureaucracy watchdog to ensure legislation and government departments become more business-friendly.

In presenting the study, MEU chief executive John Aquilina told Meusac the unit had found 400 laws and 2,500 legal notices affecting businesses. About 15 per cent of these were EU laws with national additions that went beyond the original scope of the directives. Another 45 per cent were national laws.

Using a formula to work out the financial cost of these burdens on businesses, the unit concluded that roughly €116.2 million was spent on VAT payments, fees payable under company law and planning fees, among others.

Mr Aquilina said efforts to reduce these burdens had already been made and resulted in the cutting of €8.5 million or 278,450 man-hours per year.

These were mainly the result of further ICT development for the online filing of returns under Company Law and VAT.

The burden of statistics was also reduced with shorter surveys and reduction in the sample size.

A further €9 million worth of bureaucracy will be reduced by the end of 2012, he said, reaching Malta’s target of cutting tape by 15 per cent by the end of the year.

According to the GRTU’s director general Vince Farrugia, who intervened during the presentation, the MEU lacks the legislative power to reduce red tape.

Although the unit was working hard to reduce bureaucracy, it was toothless. No government department or public official was bound to go to the MEU for a business impact assessment to be carried out.

“We are fed up of the lot of usual rhetoric. If the government really wants to make regulation work for business, it has to enact a transparent system where the MEU can act as a watchdog on better regulation, where departments and public officers are accountable and have the MEU breathing down their necks if they are not business-friendly,” Mr Farrugia said.