Abstract
There are three types of compliance costs caused by business regulations, financial costs (taxes, premiums), information compliance costs (administrative burden) and substantive compliance costs (investments etc.). Taxes and premiums are on-budget incomes for government. That is why measuring of financial compliance costs by doing surveys is not that relevant. However, administrative burden and substantive compliance costs are off-budget costs. Besides, administrative burden and substantive compliance costs are hidden costs for businesses too. No bookkeeping system has separate registration for these two types of compliance costs. Therefore, a new instrument was needed to measure these costs of businesses.
One of the most challenging aspects of such a new instrument is to discuss for which target group the results are. Is it the entrepreneurs to help them reduce their own compliance costs? Or, is it the politician or the law maker to facilitate improving the quality of law by avoiding or taking away unnecessary compliance costs? The answer to this question has a big impact on how to measure compliance costs. This chapter tries to answer these questions.
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Notes
- 1.
Consult the website of the SCM Network to reduce administrative burden for SCM manuals of the different countries.
- 2.
2 See Nijsen, André F.M. en Nico Vellinga, Mistral®, A Model to Measure the Administrative Burden of Businesses, Research Report H200110, EIM, Zoetermeer, 2002.
- 3.
Some of the messages are composed of sub-messages. Not every information obligation has the same consequences for all businesses. In that case, we have sub-messages with differing costs expressing these differences. The cost of a sub-message is determined in the same way as the cost of a message in the main text. As a result, the cost of a message with sub-messages is then the sum of the cost of all sub-messages. This element is ignored in the main text to make the description not unnecessarily burdensome.
- 4.
The frequency can be event driven or calendar driven. Examples of an event-driven information obligations are starting a business, applying for a permit, hiring an employee, notification of a labor accident. Examples of calendar-driven information obligations are a yearly Annual Account, a monthly VAT declaration, etc. In case of a calendar-driven information obligation, we would rather talk of periodicity instead of frequency.
- 5.
When data about administrative burden for all information obligations are available, this information can be used as an input for distribution models to calculate administrative burden per business or per branch of industry.
- 6.
From June 1 2006 a special SCM module for assessing substantive compliance costs of planned or new regulations is part of the regular Dutch Business Impact Assessment.
- 7.
The legal obligation to have a bookkeeping system and all third party disclosures (the obligation to inform clients, consumers, patients etc.) are considered to be substantive obligations for reasons of their functionality.
- 8.
This is the main reason why the Dutch Cabinet decided in 2007 not to take all business regulations to measure substantive compliance costs but only a selection of about 30–35 laws. The base line measurements of information obligations (administrative burden) mostly cover the total of business regulations.
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Nijsen, A. (2009). SCM to Measure Compliance Costs. In: Nijsen, A., Hudson, J., Müller, C., Paridon, K., Thurik, R. (eds) Business Regulation and Public Policy. International Studies in Entrepreneurship, vol 20. Springer, New York, NY. https://doi.org/10.1007/978-0-387-77678-1_5
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